The New Federal Rule Banning Noncompetition Agreements: What Tech Companies Should Know

By Business, Labor and Employment

The U.S. Federal Trade Commission (FTC) has adopted a new regulation that is poised to gut a longtime fixture of the U.S. tech sector: the employment non-competition agreement, or non-compete. The popularity of non-competes has waned in recent years, driven partly by a trend toward state laws limiting them, but many tech workers have signed one at some point. These contracts typically bar an employee from working for the employer’s competitors during the employment relationship and for some period of time after it.

The new FTC rule was adopted on April 23, 2024 and should take effect in late August 2024, 120 days after its publication in the Federal Register. Numerous business groups have already sued to try to prevent it from taking effect. Unless a court orders the FTC to delay the rule’s implementation, however, it will take effect this year.

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