Since the Federal Trade Commission ‘s (FTC) January 2023 proposal to ban noncompetition agreements, followed by its Final Rule approval on April 23, 2024, the landscape of restrictive covenants has shifted.
WHAT HAPPENED
The Final Rule, passed by a narrow margin of 3-2, bans new noncompetes for all workers except senior executives earning over $151,164 annually. Existing noncompetes for senior executives can continue, but new agreements with them are prohibited. The rule broadens the definition of “worker” beyond employees to include independent contractors, interns, and others. The rule will take effect 120 days after it is published in the Federal Register.
The FTC estimates 18% of U.S. workers or 30 million people are covered by noncompetes. They state that the ban may:
- Increase workers earning by nearly $300 billion.
- Save consumers up to $148 billion on health costs each year.
- Double the number of companies in the same industry founded by a former worker.
- May close the racial and gender wage gaps by 3.6-9.1%.
WHAT’S NEXT?
Despite the FTC’s assertion that the Final Rule will boost earnings and foster entrepreneurship, opposition remains strong. Legal challenges are anticipated, particularly regarding the FTC’s authority and the rule’s alignment with antitrust laws.
HOW BLUESTONE SERVICES CAN HELP
Bluestone Services Human Resources Consulting team can assist your organization in navigating this change. By partnering with Bluestone Services’ HR consulting team your organization can proactively address the challenges associated with protecting confidential information and ensure compliance with evolving regulations, ultimately safeguarding your competitive edge and mitigating potential risks. Contact us today to get started.
