On April 23, 2024, the Federal Trade Commission announced a new, nationwide rule against non-compete agreements. The details are available here.

My immediate advice to employers is: Take a deep breath and give events some time to unfold. The Rule does not take effect for 120 days, and there will almost certainly be court challenges during that time. Some court may issue an order that delays the effective date or imposes other changes. I am NOT advising you to count on this Rule being “thrown out” in court. That may or may not happen, but until the effective date gets closer and we know more about the status of court challenges, it is too early to plan a compliance strategy.

Even if the Rule comes into force as written, it has exceptions. For example, it does not ban non-compete agreements associated with the sale of a business. It does not change the rights of an employer already involved in legal proceedings to enforce non-competes. It has different standards for “senior executives.” And it does not limit some other types of post-employment restrictions. (See an earlier blog post remarking on that).

If the Rule comes into force as written, employers will be required to issue a written notice to affected employees. But you will have until at least late summer to do this—possibly longer—and there is no information on what happens if you issue the notice late. In fact, just like any new legal rule, we don’t have information on many questions that could arise. That’s another reason why it makes sense to wait a little while. THK will continue to monitor this developing issue, and over the coming months, our lawyers will be available to help employers work on compliant and strategic plans for addressing non-competition concerns.

Michael J. Hays, Business Counsel & Partner, THK Law, LLP

Author: Michael J. Hays is a civil litigation attorney and Partner at THK Law, LLP. His practice areas include employment law, business transactions, and real estate law. Michael is licensed to practice in Indiana and Michigan.

You can contact Michael by calling 574.232.3538 or email mhays@thklaw.com

Disclaimer: The THK Legal Blog is for informational purposes only and should not be relied upon as legal advice. In no case does the published material constitute an exhaustive legal study, and applicability to a particular situation depends upon an investigation of specific facts. You should consult an attorney for advice regarding your individual situation. All THK blogs are considered advertising material by the Indiana Bar Association.