The Federal Trade Commission's rule banning most non-compete agreements has significant implications for businesses that rely on these agreements to protect confidential information and customer relationships.
In April 2024, the Federal Trade Commission issued a final rule that would ban virtually all non-compete clauses for most workers. The rule, if it takes effect, would prohibit employers from entering into new non-compete agreements with workers and would require employers to notify workers that existing non-compete clauses are no longer enforceable. The rule is currently the subject of litigation in federal courts, and its ultimate fate remains uncertain.
The FTC rule broadly defines "non-compete clause" to include any contractual term that prohibits a worker from seeking or accepting work with another employer or operating a business after the conclusion of employment. This definition would capture not only traditional non-competes but potentially certain non-solicitation agreements and garden leave provisions, depending on how they are drafted.
The rule would apply to all workers — employees, independent contractors, interns, volunteers, and others — with a limited exception for senior executives. Senior executives earning more than $151,164 per year who are in "policy-making positions" may be bound by existing (but not new) non-compete agreements.
Do not abandon your non-compete program yet. Given the legal challenges currently before the federal courts, employers should continue to use carefully drafted agreements while monitoring litigation developments. In the meantime, this is a good opportunity to review whether your agreements are actually enforceable under existing Tennessee and Georgia law — many are not. Focus on trade secret protection. Regardless of what happens with the FTC rule, robust trade secret agreements and confidentiality provisions remain fully enforceable and are often more valuable than non-competes.
Even without the FTC rule, non-compete agreements in Tennessee and Georgia must meet specific legal requirements to be enforceable. Courts regularly decline to enforce overly broad agreements. Tennessee requires that non-competes be ancillary to an otherwise enforceable agreement and protect a legitimate business interest. Georgia has its own statutory framework with specific requirements for duration, geography, and scope.
Evans Harrison Hackett regularly advises employers on non-compete and trade secret matters throughout the Southeast. Contact us at 423.648.7890 if you have questions about your current agreements.
Attorney Advertising. This article is provided for informational purposes only and does not constitute legal advice. Reading this article does not create an attorney-client relationship. For advice specific to your situation, please contact Evans Harrison Hackett PLLC at 423.648.7890.