New Federal Rule Prohibits Noncompete Agreements Nationwide

The Federal Trade Commission (FTC) has issued a groundbreaking rule that bans noncompete clauses in employment contracts across the United States. This rule is set to go into effect on September 4, 2024. However, its implementation could be delayed or blocked by several ongoing legal challenges.

For workers, this new rule brings several critical rights and benefits. Firstly, employees will no longer be bound by noncompete clauses, which have historically prevented them from seeking better employment opportunities or starting their own ventures. This change is expected to increase worker earnings by an average of $524 per year, collectively raising workers' wages by $400-$488 billion over the next decade. The rule also promotes entrepreneurial activity, with an estimated 8,500 new businesses being created each year as a result of this increased labor mobility. Additionally, the ban is projected to reduce healthcare costs by up to $194 billion over the next ten years, as more competition leads to lower prices for services​.

For employers, the new rule introduces several risks and challenges. Companies can no longer rely on noncompete clauses to retain talent, which means they must find other ways to attract and keep employees. Employers also face the administrative burden of notifying current employees bound by existing noncompete agreements that these clauses are no longer enforceable. Noncompliance with the new rule could result in legal repercussions, including penalties for attempting to enforce banned noncompetes​.

The attorneys of Seattle Litigation Group, PLLC can help both employees and employers. For employees, the law firm can offer guidance on understanding your new rights and help resolve disputes regarding noncompete agreements. For employers, the law firm can help navigate the complexities of compliance and defend against any legal challenges arising from the transition.