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The Federal Government Bans Non-Competition Agreements

by | Apr 27, 2024 | Employment, Non-competition

In April, 2024, the Federal Trade Commission (FTC) issued a new rule effectively banning existing non-competition agreements for all Workers, except for senior executives. Additionally, the new FTC rule bans an Employer from entering into or attempting to enforce any new non-competition agreements, even if they involve senior executives. The FTC defines a senior executive as a Worker that that makes more than $151,164 annually and who is in a policy-making position. The Employer must give notice to its Workers who have entered into a non-competition agreement stating that the Employer will not be enforcing the agreement against the Worker. The FTC has provided a template for this required notice, as part to the newly issued rule.

The FTC rule does not prevent a Business from entering into a non-competition agreement with a person pursuant to the sale of the person’s ownership interest in that Business; or from continuing to enforce any existing cause of action related to a non-competition agreement.

In Illinois, an Employer can protect its proprietary and other sensitive business interests by requiring the Worker to enter into a non-disclosure agreement and enforcing its rights pursuant to the Illinois Trades Secrets Act. Additionally, Illinois law allows for non-solicitation agreements to be entered into with Workers who make more than $45,000 this year, which increases annually.

This rule will take effect in August, 2024. However, the US Chamber of Commerce has already filed a lawsuit to prevent the enforcement of this FTC non-competition rule. The case is now pending in Court. Please contact the attorneys at Chitkowski Law Offices, for the current status of the implementation of this rule, providing the required notice to Workers and implementing practices and agreements that protect your Businesses’ interests.