NSBA supports flexibility for small-business owners when it comes to non-compete policies.
On April 23, 2024, the Federal Trade Commission (FTC) issued its Final Non-Compete Agreement Rule (Final Rule), banning non-compete agreements between employers and their workers, specifically those that utilize non-compete agreements to protect their trade secrets, confidential business information, goodwill, and other important intangible assets.
The rule bars employers from entering or attempting to enter into a non-compete agreement with “workers” (employees and independent contractors). Employers are also prohibited from even representing that a worker is subject to such a clause.
There are few exceptions under the new rule, including for senior executives, whose existing non-compete agreements can remain in force, however employers are barred from entering or attempting to enter into a non-compete agreement with a senior executive after the effective date.
The rule has already been challenged in at least two lawsuits, one by the U.S. Chamber of Commerce, and a second filed by Ryan, LLC, a tax services firm. Both suits raise similar arguments, including that the FTC lacks authority to enact the rule, as well as its retroactive nature.
NSBA is continuing to monitor developments related to this rule and remains supportive of small-business owners being able to utilize policies most serving of their enterprise.
Read the full rule here.
