What Is the Impact of the FTC Non-Compete Ban On Banks and Bank Holding Companies? On April 23, 2024, the Federal Trade Commission (FTC) voted to finalize its proposed rule, making it an unfair method of competition, and therefore a violation of the Federal Trade Commission Act (FTC Act), for any person to enter into a non-compete clause with a worker, attempt to enforce an existing non‑compete clause with a non-senior executive, or represent that a worker is subject to a non-compete clause on or after Sept. 4, 2024. The rule defines a “non-compete clause” as a term or condition of employment that prohibits, penalizes or “functions to prevent” a worker from seeking or accepting work with a different employer (for example, a competitor) or operating their own business. The only exceptions are non‑competes entered into with “senior executives” prior to the effective date of the rule, non-competes entered into by the seller as part of a bona fide sale of a business, and situations where a party is already seeking to enforce a non-compete clause before the effective date of the rule. The non-compete ban only applies to entities covered by the FTC Act, and banks, savings and loan institutions, and credit unions are excluded from FTC jurisdiction. However, bank holding companies, their subsidiaries and other affiliates that are subject to FTC jurisdiction are subject to the non-compete ban. Because of this distinction, it is important to understand whether any existing non-compete agreements with employees are with the bank or its holding company and the status of the employee to determine if any existing non-compete agreements are enforceable. In addition, any future non-compete agreements with employees will need to be carefully crafted at the bank level. Is the Non-Compete Agreement With the Bank or Holding Company? The first fact that is important for determining whether a non-compete agreement is enforceable is whether the agreement is with the bank or a bank holding company. As noted previously, the FTC ban on non-compete clauses By Amy J. Tawney, Partner, Bowles Rice 16 West Virginia Banker
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