Potential Impact of the FTC’s Noncompete Ban on Employee Benefits and Executive Compensation
The Federal Trade Commission’s (FTC) ban on noncompetition covenants (“noncompetes”) could significantly impact the design and administration of employee benefits and executive compensation arrangements. Quick Hits The FTC’s ban on noncompetition covenants has potential implications for several aspects of employee benefits and executive compensation plans and arrangements, such as Code Section 457(f) plans, restricted stock, severance arrangements, golden parachute payments, and garden leave. The rule takes effect on September 4, 2024 , but a federal district court in Texas recently granted a preliminary injunction staying the enforcement of the final rule as to the parties in the case. The court’s decision, pending a final ruling on the merits by August 30, 2024, has signaled that the FTC’s noncompete rule will not survive judicial scrutiny. Although the U.S. District Court for the Northern District of Texas recently granted a preliminary injunction staying enforcement of the ru...