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| Name | Important 2024 Legal News: Is this the End of Non-Competes in the USA |
| Video Uploader | Video From Neufeld Legal |
| Upload Date | This Video Uploaded At 28-04-2024 01:37:26 |
| Video Discription | US employment law is set to undergo a seismic legal change with the FTC seeking to eradicate most employment-related non- competition arrangements. We investigate these sweeping changes and the judicial scrutiny they face. We recently saw the United States Federal Trade Commission vote to institute a new rule as to the interpretation of section 5 of the Federal Trade Commission Act, which bans current and future non-competes in the employment setting, with the exception of existing non-competes for senior executives. The new rule, which is set to come into effect at the end of August 2024, only provides for one permissible employment-related carve-out, which is provided to existing worker non-competes with respect to senior executives, who are workers earning more than $151,164 USD annually who are in a “policy-making position.” The US Federal Trade Commission’s explanation for this particular carve-out for existing non-competes with senior executives, was its determination that this subset of workers is less likely to be subject to the kind of acute, ongoing harms currently being suffered by other workers subject to existing non-competes and there were credible concerns raised as to the practical impacts of extinguishing existing non-competes for senior executives. The new rule also contains a notice obligation on the employer, requiring employers to notify employees with existing non-competes that they are no longer enforceable. To understand whether this in fact means the end of non-competes in the US employment context, one must begin by assessing the actual language of the rule, so as to determine what is included and what is excluded. The FTC’s rule defines “non-compete clause” as “a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from (1) seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or (2) operating a business in the United States after the conclusion of the employment that includes the term or condition.” The FTC’s rule further provides that, for purposes of the final rule, “term or condition of employment” includes, but is not limited to, a contractual term or workplace policy, whether written or oral. The rule further defines “employment” as “work for a person.” The FTC’s rule defines “worker” as “a natural person who works or who previously worked, whether paid or unpaid, without regard to the worker’s title or the worker’s status under any other State or Federal laws, including, but not limited to, whether the worker is an employee, independent contractor, extern, intern, volunteer, apprentice, or a sole proprietor who provides a service to a person.” As such, contending that this is the end of non-competes in the United States of America would appear to be somewhat premature. The imposition of such a broad and expansive rule, which is not nuanced and upends over a century of commercial and legal practice, by 3 unelected FTC commissioners, still faces a very tough legal road ahead. The outcome of this effort to ban employment-related non-competes is a long way from being settled, with the final result being far from certain. The FTC’s definition further states that the term “worker” includes a natural person who works for a franchisee or franchisor, but does not include a franchisee in the context of a franchisee-franchisor relationship. The FTC’s rule does not apply to non-competes entered into by a person pursuant to a bona fide sale of a business entity. In addition, the rule does not apply where a cause of action related to a non-compete accrued prior to the effective date. The rule further provides that it is not an unfair method of competition to enforce or attempt to enforce a non-compete or to make representations about a non-compete where a person has a good-faith basis to believe that the FTC’s rule is inapplicable. The FTC’s rule does not limit or affect enforcement of State laws that restrict non-competes where the State laws do not conflict with the final rule, but it pre-empts State laws that conflict with the final rule. Meanwhile, recognizing that the Courts might strike down a part of the new rule, the FTC included a severability clause such that if any part of any provision or application of the FTC’s rule is determined to be invalid or unenforceable, the remainder of the FTC’s rule is intended to remain in effect. There are already judicial challenges to the FTC’s non-compete rule, such that there is already a degree of uncertainty as to its exceedingly broad and expansive application, especially where there may well be legitimate reasons for instituting a non-compete on a particular employment arrangement. #noncompete #ftc #employmentlaw [XK6PYHhZNtY] |
| Category | News & Politics |
| Tags | Legal news | non-compete | employment law | Business news | job news |
