FTC Bans Most Non-Compete Clauses!!!
Here’s what you need to know:
The Big Change:
‼️ The FTC banned most non-compete clauses for all workers, including insurance agents and brokers (effective 120 days after publication in the Federal Register, which would cause an effective date in August, 2024)‼️
What’s Not Affected:
🙅♂️ Non-Solicitation Agreements: You can still restrict former employees from soliciting your clients or coworkers.
🙅♂️ Confidentiality Agreements (NDAs): These agreements remain enforceable to protect your confidential business information. As always, this term, “confidential business information” will be narrowly construed for the Agreement to be enforceable.
What About Existing Agreements?
- Existing non-compete clauses are generally unenforceable for most workers under the FTC’s new ban.
- Employer Notification: Under the new Rule, an employer may be required to notify a former employee if they intend to enforce an existing non-compete (applicable only to senior executives).
- Exception: Existing non-competes for “senior executives” earning over $151,164 annually in a policy-making position may still be enforceable.
What This Means for You:
- Review your existing employment agreements for non-compete clauses.
- Consider alternative ways to protect your business interests, such as non-solicitation agreements and NDAs.
- Consult with legal counsel to ensure compliance with the new FTC rule.
- If you choose to protect your business assets through an agreement, also remember your 1099 contractors and that a contract must have consideration in order to be enforceable. It is not likely that retaining a job will be “consideration.” There are options, however.
Uncertainty and Legal Challenges:
- The FTC’s rule is already being challenged in court, so its ultimate fate remains uncertain. For now, it behooves your business to plan on complying with the new rule.
Key Takeaways:
👉 Most non-compete clauses are banned for insurance agents and brokers.
👉 Non-solicitation agreements and NDAs remain viable options.
👉 Prepare for potential legal changes and seek legal guidance.
Additional Considerations:
‼️ The FTC rule does not apply to independent contractors (1099 workers). However, consider using confidentiality agreements with them as well ‼️
Moving Forward:
1️⃣ Stay informed about potential legal developments.
2️⃣ Adapt your employment practices to comply with the FTC rule.
About Nicholas Lamparelli
Nick Lamparelli is a 20+ year veteran of the insurance wars. He has a unique vantage point on the insurance industry. From selling home & auto insurance, helping companies with commercial insurance, to being an underwriter with an excess & surplus lines wholesaler to catastrophe modeling Nick has wide experience in the industry. Over past 10 years, Nick has been focused on the insurance analytics of natural catastrophes and big data. Nick serves as our Chief Evangelist.
Nick Lamparelli is a 20+ year veteran of the insurance wars. He has a unique vantage point on the insurance industry. From selling home & auto insurance, helping companies with commercial insurance, to being an underwriter with an excess & surplus lines wholesaler to catastrophe modeling Nick has wide experience in the industry. Over past 10 years, Nick has been focused on the insurance analytics of natural catastrophes and big data. Nick serves as our Chief Evangelist.
