Tip: Know the narrow exceptions. The new Federal Trade Commission final rule banning nearly all noncompetes clocks in at 165 dense pages. Read on for the highlights. When effective, the rule will: 1. Completely ban new non-competes for workers. The term “workers” includes, but is not limited to, employees (even senior executives), independent contractors, externs/interns, apprentices, sole proprietors, and volunteers. Watch out: The term “workers” is so broad that nearly all staff may likely fall under this definition unless an exception to the final rule applies, caution attorneys with law firm McGuire Woods in online analysis. This could include “all clinical providers, including physician assistants and registered nurses, non-clinical personnel,” non-owner physicians, physician owners and partners, and independent contractors, they predict. They go on to clarify that it will be important to distinguish when a worker is “providing services” to a person, which appears to be the FTC’s touchstone for being a worker, even if such determination is not easily defined. 2. Prohibit employers from enforcing existing non-competes with workers. Exception: Existing non-competes for senior executives can remain in force. The rule defines senior executives as employees who earn over $151,164 in “total annual compensation” and possess “policy-making authority,” which is “final authority to make policy decisions that control significant aspects of a business entity.”
However: This does not include authority limited to just advising or exerting influence over such policy decisions. The authority must be over the entire enterprise, and not just a department or division. 3. Require employers to formally notify impacted workers that their non-compete clause is no longer in effect and will not be enforced. The notices must be sent out on or before Sept. 4, so get prepared. Tip: To aid employers’ compliance, the rule includes the requirements for acceptable means of communication along with a model notice. This section also allows for optional notices in additional languages, but only in an FTC-provided translation of the model language. Other highlights of the rule include that it: Meaning: States may impose stricter requirements and restrictions with respect to non-competes provided that those restrictions afford greater protections to employees than those contained in the final rule. But, the final rule supersedes all state laws, regulations, orders and interpretations that are inconsistent with the final rule. Note: The FTC fact sheet on the rule is at www.ftc.gov/system/files/ftc_gov/pdf/Non-Compete-Fact-Sheet.pdf.