Recently, the Federal Trade Commission (FTC) voted to ban employee noncompetition agreements for companies within its jurisdiction, including noncompete agreements for employees who are currently in place, other than senior executive officers. It is important to note that financial institutions are not subject to FTC jurisdiction. Therefore, the ban would not currently apply to financial institutions. The federal banking regulators would need to specifically adopt regulations applying the provisions to financial institutions, much like Section 5 of the FTC Act. The current consensus is that this is unlikely to occur, especially given the litigation surrounding the rule. However, for operating subsidiaries of bank holding companies other than the financial institutions, the FTC may have jurisdiction over such nonbank subsidiaries and noncompete agreements may not be allowed. This could be a consideration in the organizational structure of a bank holding company if the use of noncompete agreements is desired.
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