FTC and NLRB Change Non Compete Rules

“Olly Olly Oxen Free” is a “catchphrase to indicate that players who are hiding can come out into the open without losing the game or that the position of the sides in a game has changed (as in which side is on the field or which side is at bat or “up” in baseball or kickball); alternatively, that the game is entirely over” according to Wikipedia.

With the recent NLRB decision on Non-Compete Regulations, the debates are heating up. The Federal Trade Commission (FTC) has just finalized its rule, shaping the future of these agreements for American workers. This move has triggered discussions across different industries, sparking questions about the rights of both employers and employees. Let’s dive into the details of this ruling and see what it means for businesses and workers.

What side of the new NLRB decision do you fall on?

It depends on what side of the employer vs. employee. Let’s explore the real world outcome of the new NLRB decision on Non-Compete Regulations,.  These are the current regulations.

Scope of Restriction

This defines the specific activities or industries in which the employee is restricted from engaging after leaving the company. It typically includes language prohibiting the employee from working for direct competitors or engaging in similar business activities.

Geographic Limitations

Non-compete agreements often specify the geographic area within which the restrictions apply. This could be a specific region, city, state, country, or even worldwide, depending on the nature of the business and the employer’s interests.

Duration of Non-Compete

This sets the length of time during which the employee is prohibited from competing with the employer after leaving the company. Duration can vary widely depending on jurisdiction and industry norms, but it’s typically anywhere from six months to several years.

Non-Solicitation of Clients/Customer Restrictions

In addition to restricting direct competition, non-compete agreements often include provisions prohibiting former employees from soliciting or doing business with the employer’s clients or customers for a certain period after termination. This is to prevent the employee from leveraging their relationships with the employer’s clients for their own benefit.

What does the new NLRB Non-Compete Regulation effect business relationships currently?
Two businessmen shaking hands - Impact of FTC regulation on business relationships


If the former employer discovers that their ex-employee is violating a non-compete agreement by working for a competitor, they can seek an injunction from a court. An injunction is a court order that requires the individual to stop engaging in the prohibited activities. The court may also order the new employer to terminate the employee or cease their employment activities.

Monetary Damages

The former employer may also seek monetary damages as compensation for any harm caused by the violation of the non-compete agreement. This could include lost profits, damage to business relationships, or other financial losses suffered as a result of the employee’s actions.

Liquidated Damages

Some non-compete agreements include provisions for liquidated damages, which are predetermined amounts of money that the violating party agrees to pay in the event of a breach. If the non-compete agreement specifies liquidated damages, the new employer could be liable for these payments.

Attorney’s Fees and Court Costs

In some cases, the court may order the losing party to pay the prevailing party’s attorney’s fees and court costs. This means that if the former employer successfully enforces the non-compete agreement against the employee and/or the new employer, the new employer could be required to cover the legal expenses incurred by the former employer.

Contempt of Court

If the new employer continues to disregard the court’s injunction or other orders, they could be held in contempt of court, which can result in additional fines or even imprisonment for individuals involved.

What the new NLRB means for the future Customer?

Under the final rule, existing noncompete for senior executives can remain in force. Employers, however, are prohibited from entering into or enforcing new noncompete with senior executives. The final rule defines senior executives as workers earning more than $151,164 annually and who are in policy-making positions.

Additionally, the Commission has eliminated a provision in the proposed rule that would have required employers to legally modify existing noncompete by formally rescinding them. That change will help to streamline compliance.

Instead, under the final rule, employers will simply have to provide notice to workers bound to an existing noncompete that the noncompete agreement will not be enforced against them in the future. To aid employers’ compliance with this requirement, the Commission has included model language in the final rule that employers can use to communicate to workers.

The final rule will become effective 120 days after publication in the Federal Register.

Once the rule is effective, market participants can report information about a suspected violation of the rule to the Bureau of Competition by emailing noncompete@ftc.gov

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Scott Wesley