FTC Non-Compete Ban Compliance Risk Estimator

Why Assess Non-Compete Risk Now?

The Federal Trade Commission voted in 2024 to adopt a sweeping rule banning most non-compete clauses for workers, with limited exceptions for senior executives. The rule, if it survives ongoing litigation, would require employers to rescind existing agreements and notify workers that the clauses are no longer enforceable. Even if the courts delay implementation, many states—including California, Minnesota, Colorado, and New York—are tightening restrictions. Organizations need a clear picture of their exposure so legal, HR, and security teams can prioritize compliance steps. This risk estimator helps you benchmark readiness by weighing agreement coverage, geographic complexity, documentation practices, and alternative protections.

The model does not provide legal advice, but it distills common risk drivers into a single score. High scores indicate greater urgency to inventory agreements, draft rescission notices, and bolster trade secret safeguards. Low scores suggest existing processes align with the FTC’s expectations, though companies should still monitor legal developments.

Key Inputs Explained

Workforce coverage—how many employees are bound by non-competes—drives much of the risk. The FTC rule exempts “senior executives” earning at least $151,164 (2023 threshold) who perform policy-making functions, but only for existing agreements. New agreements would be banned even for executives. Use the senior executive field to quantify how much of your exposure falls into the narrow exception. The number of states reflects the compliance complexity: each state may have unique notice or wage thresholds, requiring tailored strategies.

Documentation and mitigation inputs capture organizational readiness. A searchable inventory simplifies the rescission process; lacking one increases risk. Drafting notice templates in advance accelerates compliance. Alternative agreements—non-solicitation and confidentiality clauses—help protect customer relationships and trade secrets without violating the rule. A trade secret safeguard score reflects policies like access controls, incident response plans, and employee training.

How the Risk Score Is Calculated

The calculator assigns weighted points to each input. Coverage ratio (employees bound divided by total employees) can contribute up to 40 points, with higher ratios yielding higher risk. Multi-state deployment adds up to 15 points, recognizing the coordination challenge. Lack of agreement inventory adds up to 10 points, and absence of notice plans adds up to 10 more. Strong trade secret safeguards reduce risk by subtracting up to 8 points, acknowledging that robust alternatives lessen dependence on non-competes. Being a franchisor triggers additional risk because franchise agreements face heightened scrutiny.

Senior executive coverage partially offsets risk because their agreements may remain enforceable, but only if they represent a small slice of total agreements. The tool grants up to 5 points of mitigation when senior executives make up more than 10% of bound workers. Reliance on non-solicitation clauses reduces risk by 5 points, signaling that the company already uses less restrictive covenants.

The final score categorizes risk as Low (0-29), Moderate (30-59), or High (60+). The output narrative interprets the score and recommends next steps such as building an agreement inventory, engaging legal counsel, or launching training campaigns. Because the FTC rule’s status may change, the explanation advises monitoring litigation milestones and state-level reforms.

Example

Imagine a mid-sized SaaS company with 1,200 employees, 480 of whom signed non-competes across 12 states. It lacks a consolidated agreement inventory and has not drafted rescission notices. However, it uses confidentiality agreements and rates its trade secret safeguards at 3 out of 5. The estimator produces a score around 68 (High risk), highlighting the need to catalog agreements, build a communication plan, and prepare for potential litigation. If the company reduced coverage to 150 workers and created an inventory, the score would drop to the Moderate range, signaling improved readiness.

Best Practices and Mitigation Strategies

High-risk organizations should immediately inventory agreements, classify workers by role and compensation, and draft rescission templates. Legal teams should review alternative covenants (non-solicit, non-disclosure, training repayment agreements) to ensure they do not function as de facto non-competes. HR leaders should coordinate with IT to strengthen trade secret controls before rescinding non-competes. The explanation section highlights resources from the FTC, SHRM, and law firms that track compliance deadlines.

Frequently Asked Questions

Does this tool assume the FTC rule is effective? Yes, the default assumption is that the rule takes effect. Adjust your action plan if the courts delay or block implementation, but state laws may still impose similar restrictions.

How should franchisors interpret the score? Franchisors face unique requirements because franchisees and franchisors often use mutual non-competes. The tool adds risk points to encourage proactive legal review.

Are non-solicitation agreements safe? The FTC rule targets agreements that function as non-competes. Carefully drafted non-solicits focused on preventing poaching or protecting trade secrets generally remain permissible, but seek legal advice.

What documentation should I gather? Assemble signed agreements, employment dates, compensation data, and contact details to support rescission notices. The estimator’s copy feature helps create a checklist.

How often should I reassess? Re-run the score whenever you add new agreements, acquire companies, or implement new safeguards. Regular reviews ensure readiness if the FTC or state regulators act quickly.