NON-COMPETES BANNED BY NEW FTC FINAL RULE

The Federal Trade Commission has released its much-anticipated Final Rule that bans most non-compete agreements across the United States. The Final Rule generally applies to non-compete provisions or agreements that prohibit a worker—whether an employee or independent contractor—from accepting work with a different company. Employers are now prevented from entering into or attempting to enforce these provisions. While the Final Rule will not take full effect for several months (the exact date is not yet known), it applies to both existing and future non-compete restrictions. For existing provisions, employers have an affirmative obligation to provide a “clear and conspicuous notice” to the worker that the restriction will not and cannot be enforced; model language for this notice is provided in the Final Rule. The FTC estimates over 785,000 Nebraska-based workers will be affected by the Final Rule.

The Final Rule contains several exceptions of note:

• • Non-Solicitation: The Final Rule does not apply to or prohibit most forms of non-solicitation agreements. Non-solicitation provisions prohibit a worker from soliciting customers and/or co-workers for a new company, but do not prevent that worker from merely accepting new employment as does a non-compete provision.
  • Sale of Business: The Final Rule does not apply to a non-compete provision agreed upon by the parties pursuant to a bona fide sale of a business. Therefore, companies can generally enforce restrictions imposed in conjunction with the purchase of a business.
  • Existing Causes of Action: The Final Rule does not apply to claims a company may have for breach of a non-compete provision that arose prior to the effective date (which, as noted above, is unknown but likely to be approximately three to four months from today).
  • Senior Executives: The Final Rule does not apply to existing non-compete provisions with Senior Executives, which are those in a policy-making position who earn at least $151,164 per year. While existing provisions are excluded and may be enforced moving forward, companies cannot enter into or enforce any new non-compete provisions with Senior Executives.

Nebraska companies should take three steps in light of the Final Rule: (1) Review all existing agreements with restrictive covenants to determine whether any include a non-compete provision covered by the Final Rule; (2) Provide notice to any workers subject to a non-compete provision; and (3) Revise existing templates to comply with the Final Rule. A copy of the Final Rule can be found here. If you have questions regarding the Final Rule, please contact Torrey J. Gerdes, Susan M. Foster, Melanie Whittamore-Mantzios, or Christopher M. Schmidt at 402-475-1075.