FTC Final Rules Banning Non-Competes Vote Next Tuesday

As you know, last year, the FTC issued a proposed rule banning virtually all non-compete agreements (which does not include non-solicitation agreements, confidentiality agreements and the like).

Yesterday, the FTC announced that a special Open Commission Meeting will be held virtually on Tuesday, April 23, 2024, at 2 p.m. EDT at which time the FTC is expected to vote on a Final Rule.

Here is what you need to know for now:

When is the vote on the Final Rule to ban non-competes?

Tuesday, April 23, 2024 at 2 p.m. EDT. The Open Commission Meeting will be available to view here.

What is expected to happen?

The consensus among Polsinelli’s Restrictive Covenant and Trade Secret Practice Group, other experts, and scholars is that the FTC will vote to implement a Final Rule substantially similar to the Proposed Rule. In short, that means that it will vote to ban essentially all non-competes with limited exceptions (some form of ownership in the entity being sold – the Proposed Rule had a 25% threshold).

When will the Final Rule be effective?

The Final Rule is expected to become effective 60 days after publication in the Federal Register. (The FTC has the ability to implement the Final Rule sooner if necessary due to an “emergency situation” but we do not anticipate that in this instance.)

What can you do now?

• Understand that the vote will be Tuesday; that does not mean the Rule will be effective Tuesday.
• Understand that the Rule likely will not be effective until 60 days after publication in the Federal Register and that we anticipate that there will be litigation seeking to block the Rule from going into effect, as discussed below.
• Evaluate your use of non-competes, and develop strategies for navigating the uncertainties of the time.
• Strategically and thoroughly analyze your trade secret protocols and protections.

What do we expect next?

Experts and scholars (and we) fully expect the Final Rule will be challenged in Federal Court with the challenging parties seeking immediate injunctive relief preventing implementation of the Final Rule, based upon the FTC exceeding its authority.