Are noncompetes still enforceable for senior executives after the FTC’s recent ban?

On April 23, 2024, the ban on noncompete agreements was finalized. The Federal Trade Commission (FTC) finalized this new rule on the basis that noncompete agreements disproportionately restrict workers from finding gainful employment once their current employment period comes to an end.

Nonetheless, as with all major changes to the law, there is a transitional period, and in some cases, noncompete agreements are still enforceable. This is the case for existing noncompete agreements that concern senior executives.

What do the new laws say about senior executives?

What is a senior executive?

For an employee to qualify as a senior executive, certain conditions must be met. Firstly, the employee must be involved in key business decisions and they must hold a “policy-making” position within the company. Secondly, the employee’s remuneration must total at least  $151,164.

Generally, the senior executive exception applies to company presidents, chief executive officers and higher management with equivalent positions. It is important to note that the senior executive exemption applies only to existing noncompete agreements. New agreements will no longer be able to be enforced.

As mentioned, there is generally a transition period as major changes to the law come into force. The final rules regarding noncompete agreements will go into effect 120 days after publication in the federal register. During this period, there are likely to be numerous legal challenges and cases that shape the law further.

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