The Federal Trade Commission has issued a proposed final rule that would ban most new noncompete clauses in employment agreements and would make all existing noncompete clauses in employment agreements unenforceable except for those made in connection with the bona fide sale of a business and those covering senior executives.

The FTC defines “senior executive” as an employee who earns more than $151,164 annually and who is in a “policy-making position.” The rule defines a “noncompete clause” as any contractual provision that prohibits an employee or former employee from working for a competing employer or starting a competing business within a certain geographic area and period of time after the employee’s employment ends.

The rule also invalidates agreements that require employees to pay back the employer for training costs if the employee’s employment terminates within a specified period of time.

The final rule does not explicitly invalidate other covenants, including non-solicitation, non-servicing, non-recruitment, and nondisclosure clauses. In addition, the rule only preempts state laws that are less protective of employee rights than the federal law.

The rule is scheduled to go into effect 120 days following its publication in the Federal Register but could be blocked by expected legal challenges. The U.S. Chamber of Commerce has already said that it would sue the FTC to block the rule. If the rule does go into effect, only those noncompete agreements that are entered into as part of the sale of a business would remain enforceable.

If you need assistance reviewing existing employee agreements for your business, or if you have any questions regarding this new rule, please contact Nancy Abrams at nabrams@sgrvlaw.com or Jennifer Myers Chalal at jmyers@sgrvlaw.com.

Spector Gadon Rosen Vinci P.C. Member Jennifer Myers Chalal has been appointed as a Hearing Committee Member serving the Disciplinary Board of the Supreme Court of Pennsylvania for a three-year term beginning July 1, 2024.

Hearing Committee Members serve the Board as volunteers in their respective districts to conduct hearings and act as a formal reviewing body to determine if a case might move forward in pursuit of a particular course of discipline.

Chalal concentrates her practice in the area of employment law handling all types of employment law matters including discrimination claims under Title VII, the ADA, the ADEA, the PHRA, and the NJ Law Against Discrimination, retaliation claims, wrongful discharge claims, wage and hour claims, FMLA claims, breach of contract claims, non-compete claims, and claims involving workplace torts. She also handles ADA accessibility suits and denials of public accommodations for businesses, especially in the hospitality industry. She provides advice to businesses regarding employment matters, conducts workplace investigations for businesses presented with complaints of sexual harassment or other forms of discrimination, prepares employment handbooks, and provides workplace seminars regarding discrimination laws. Her litigation practice extends throughout Pennsylvania and New Jersey in both Federal and State Court.

Chalal received a J.D. with honors from Temple University School of Law. She is a Phi Beta Kappa graduate from Hofstra University where she received a B.A. degree, magna cum laude, with High Honors in Speech Communication. Following graduation from Temple University School of Law, she served as a Judicial Law Clerk for the Honorable Sandra Mazer Moss (ret) of the Court of Common Pleas of Philadelphia.

Spector Gadon Rosen Vinci P.C. has represented clients nationally and internationally for nearly 50 years and provides counsel and expertise across the entire spectrum of legal practice, from complex litigation to sophisticated transactional and corporate matters. The firm has offices in Philadelphia, New Jersey, Florida, and New York.