{3 minutes to read}  Are you a business owner with written agreements with independent contractors or employees that include non-compete clauses? You may have heard that the Federal Trade Commission (FTC) recently issued a final rule banning non-competes. That final rule has not been published and has been challenged in court. I will briefly summarize the FTC rule for you and let you know what you, as a business owner, need to do now. 

On April 23rd, the FTC issued a final rule that, if it goes into effect, will ban non-compete clauses in both independent contractor and employment agreements nationwide. What does that mean for you as a business owner? If your business currently has independent contractor agreements or employment agreements that include non-compete clauses for most employees or contractors, those clauses will be unenforceable. There is an exception for senior executives, defined by the FTC as somebody making at least $151,000 a year and in a policy-making position. 

Once again, existing independent contractor agreements and employment agreements with non-competes won't be enforceable except for agreements with senior executives. In the future, non-compete provisions will not be allowed in independent contractors or employment agreements for any employee, even senior executives. 

So, as a business owner, what do you do now? First, go through the business agreements that you currently have and determine whether there is a non-compete provision within those agreements. If the employee or independent contractor is not a senior executive, you must notify them that their existing non-compete provisions will no longer be enforceable. For any new agreements, remove the non-compete clauses and consider how to protect the business without a non-compete.

There are other ways a business can protect its interest short of including a non-compete clause in an employment agreement or independent contractor agreement. In fact, for many years in Maryland, which is primarily where I practice, it has been the rule that non-compete agreements or clauses are very rarely enforced, and if enforced, they are limited.

In many ways, this won't be a game-changer for businesses. Contact us if you have any questions or need assistance drafting new agreements or drafting notices for your existing employees.

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