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Understanding the FTC's New Rule on Non-compete Agreements



The Federal Trade Commission (FTC) has recently issued a groundbreaking rule that will significantly impact noncompete agreements in the workplace.


As your trusted legal advisors, the Law Office of Jack Kakoian is here to help you navigate these changes and understand their implications for your business.


What Are Noncompete Agreements?


Noncompete agreements are contracts between employers and employees that prohibit the employee from working for a competitor or starting a competing business for a specified period after leaving the company. These agreements have been a common practice in many industries for years. The New FTC Rule In a 3-2 vote, the FTC has issued a new rule that effectively renders most noncompete agreements unenforceable. This decision is based on the FTC's belief that these agreements suppress wages, stifle innovation, and hinder economic dynamism.


Key Points of the New Rule:

1. Effective Date: The rule is expected to become effective 120 days after it's published in the Federal Register, likely around September 2024.

2. Employee Notification: Employers must notify current and former employees that their noncompete clauses are no longer enforceable.

3. Exemptions: - Highly paid executives (earning over $151,164 annually) with existing noncompetes may be grandfathered in. - Nonprofit organizations and certain financial services companies may be exempt.

4. Sale of Business: Noncompete agreements related to the sale of a business are still permissible.


What This Means for Your Business

1. Review and Update Agreements: It's crucial to review your current employment agreements and prepare to update them in line with the new rule.

2. Strengthen Other Protections: While noncompetes may no longer be enforceable, you can still protect your business interests through: - Nondisclosure agreements (NDAs) - Confidentiality agreements - Strengthened proprietary information clauses

3. State-Specific Considerations: Remember that some states may have even more restrictive rules on noncompetes. It's important to comply with both federal and state regulations. Next Steps As we await the final implementation of this rule and monitor potential legal challenges, it's essential to start preparing your business for these changes.


The Law Office of Jack Kakoian is here to assist you in:

1. Reviewing your current employment agreements

2. Drafting compliant employee notifications

3. Developing alternative strategies to protect your business interests Stay informed and proactive.


Contact us today to ensure your business is ready for this significant shift in employment law.

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