What you need to know about the FTC’s new Non-Compete Rule
In April, the Federal Trade Commission (FTC) issued a long awaited final rule on noncompete agreements between employers and their workers, including independent contractors. It is estimated that more than 10.5 million Texas employees across every industry may be impacted by this shift in Federal policy. Here’s what small business owners need to know:
1. What is noncompete agreement?
Any term or condition in an employment contract that prevents, prohibits, or penalizes a worker from getting a different job or starting a business after leaving their employment.
2. When the new FTC Rule on noncompete agreements become effective?
The FTC rule on noncompete agreements is expected to take effect on September 4, 2024.
3. What businesses will be impacted?
While many regulations are dependent on a company’s size, this ruling affects business of all sizes. Every industry will be impacted but small businesses in technology, professional services and healthcare who rely heavily on noncompete agreements may find significant changes are required in hiring practices and company policies.
4. What do I need to do to meet new FTC compliance guidelines for noncompete agreements?
- Update HR Materials: Review current employment contracts, handbooks and workplace policies to ensure all language is in compliance with the new regulation.
- Notify Employees: Notify all current and former employees in writing that their existing noncompete agreements are no longer enforceable.
4. Which workers are covered?
The rule applies to all types of workers except senior executives. As long as they meet the criteria listed below, senior executives’ non-competes will remain valid.
- Who does the FTC Consider a Senior Executive?
- Compensation Threshold: Senior Executives are employees or independent contractors who earn more than $151,164 in compensation annually; AND
- Policy-Making Position: Senior Executives hold a position with the authority to make policy decisions for the entire company. This includes roles such as President, CEO, or any other position with significant authority over company policies.
SuiteLeap Can Help
Curious to learn exactly how your business will be affected by the FTC ruling on noncompete agreements? SuiteLeap has fractional HR Executives that can help. Contact us using the form below to schedule a free consultation.
