Answers to Key Questions Raised by the FTC’s Final Rule Banning Non‑Compete Provisions

In January 2023, the Federal Trade Commission (FTC) circulated a draft rule proposing to broadly ban non-compete provisions. After weighing a plethora of public comments, the FTC issued a final rule (Rule) to officially forbid employers – subject to a limited exception – from imposing or enforcing “non-compete clauses” on April 23, 2024. Barring a court order in an ongoing legal challenge staying the Rule from going into effect, the Rule will become effective on September 4, 2024. The effective date is important because the Rule is retroactive and requires employers to inform employees in writing on or before the effective date that any non-competes previously imposed on them are unenforceable and will not be enforced. Failure to comply with those requirements can result in significant fines for employers. This guest article by Friedman Kaplan partner Lance J. Gotko offers answers to questions raised by private fund managers following the issuance of the Rule, including about its scope, timing and potential impact on existing and future employment arrangements. The article also provides an update on the status of the bill passed in New York – and ultimately vetoed by its governor – proposing to ban virtually all new non-compete provisions. See “What Fund Managers Should Know About the FTC’s Proposed Ban on Non‑Compete Provisions” (Jun. 1, 2023).

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