The Federal Trade Commission issued a final rule in April 2024 that would ban virtually all non-compete agreements for workers across all sectors, representing a significant regulatory action with far-reaching implications for commercial insurance brokerages. The Council's Yellow Alert provided members with immediate analysis of the rule's scope, effective date, and impact on existing employment agreements. The rule faced immediate legal challenges that ultimately resulted in a federal court blocking its implementation.
Yellow Alert: FTC Issues Final Rule Banning Non-Compete Agreements
The Federal Trade Commission issued a final rule in April 2024 that would ban virtually all non-compete agreements for workers across all industries and company sizes, representing the most sweeping federal action on employment agreements in U.S. history.
What the Rule Does
The final rule prohibits employers from entering into, enforcing, or attempting to enforce non-compete clauses with workers. It would have applied to existing non-competes as well as future agreements, requiring employers to notify current and former workers that any existing non-competes are no longer enforceable.
The rule included a narrow exception for senior executives — defined as workers earning more than 51,164 annually in policy-making positions — whose existing non-competes could remain in effect, though new non-competes with senior executives would also be prohibited.
Impact on Commercial Insurance Brokerage
The Council urged member firms to consult with legal counsel to assess exposure under the rule and review existing non-compete agreements. For commercial insurance brokerages, non-competes have traditionally served as a key mechanism for protecting client relationships, book of business, and proprietary trade information when employees depart.
The Council joined business groups in expressing concern about the rule’s scope and filed comments opposing the regulation during the rulemaking process.
Legal Challenge and Outcome
The rule faced immediate legal challenges from business groups. A federal district court in Texas issued a nationwide preliminary injunction blocking enforcement of the rule, and subsequently issued a final judgment vacating the rule entirely. The FTC’s non-compete ban did not take effect as a result of the court’s ruling.
