Q&As on the FTC’s Employee Non-Compete Ban
What happened?
The FTC announced a ban on employee non-competes in the U.S. on April 23, 2024.
This was a very significant and controversial decision that followed a lengthy proposal and comment process. There were over 26,000 comments on the proposed rule. The final vote of the FTC commissioners approving the ban was 3-2.
The impact of this ban would have been especially relevant for businesses like veterinary practices where typically over 90% of the business value is ‘goodwill.’ In the past, practice owners could protect that goodwill with associate non-competes in most states, as long as the restrictions were reasonable in scope. The FTC ban would have prohibited almost all such associate non-competes in the entire U.S.
Did the FTC’s ban on employment non-competes go into effect?
No. It was scheduled to go into effect on September 4, 2024. However, prior to that date cases were filed challenging the ban and courts granted injunctive relief blocking the FTC ban from going into effect. After the change of administrations resulting from the November 2024 elections, the FTC has not pressed its appeals of those court decisions and it now appears clear that the Trump administration will eventually formally abandon the FTC non-compete ban altogether.
Are any repercussions expected from the FTC ban not going into effect?
Yes. There already has been a recent trend among certain states to prohibit or substantially limit employee non-competes and it is likely that some other states will eventually implement similar prohibitions or restrictions now that there will not be a federal ban on employee non-competes.