The Federal Trade Commission today finalized a new rule to ban the use of noncompete clauses in employee contracts. While the FTC does not have regulatory authority over banks, it does have authority over bank affiliates.
The final rule makes it illegal for an employer to enter into a noncompete with a worker, maintain a noncompete with a worker or tell workers they are subject to a noncompete. Noncompete agreements with senior executives entered into before the rule’s effective date—which is 120 days after the rule’s publication in the Federal Register—remain in force under the final rule. Existing noncompetes with other workers are not enforceable after the effective date.
Last April, the American Bankers Association joined the U.S. Chamber of Commerce and nearly 300 national, state and local trade associations and chambers of commerce in a comment letter opposing the FTC rule. The groups asserted that noncompetes serve pro-competitive interests by encouraging investment in employees and helping companies protect their intellectual property, and that the FTC lacks the statutory authority to issue a rule, among other arguments.
