The non-compete rule refers to regulations that restrict or prohibit non-compete agreements, which are contracts preventing employees from working for competitors or starting a competing business for a certain period after leaving a job.
Latest Developments:
- FTC’s Final Rule: On May 7, 2024, the Federal Trade Commission (FTC) published a final rule banning almost all non-compete agreements between employers and workers. This rule aims to promote competition, increase worker wages, and foster innovation.
- Court Challenges: On July 3, 2024, a district court in Texas issued a preliminary injunction against the FTC’s rule, delaying its enforcement for certain plaintiffs. The court ruled that the FTC lacked the authority to issue such a sweeping ban and found the rule to be arbitrary and capricious.
- Recent Rulings: On July 24, 2024, a federal judge in Pennsylvania upheld the FTC’s ban on non-compete agreements. This ruling supports the FTC’s authority to enforce the ban, which aims to promote competition and protect workers’ rights.
- Upcoming Legal Challenges: The legitimacy of the FTC’s regulation is expected to be resolved by superior judicial authorities, such as the U.S. Court of Appeals in the Third and Fifth Circuits. The decisions in these legal battles will shape the enforceability of the rule across the country.
Key Points:
- The last rule from the FTC, banning most non-compete agreements regarding “workers,” pertains to any employment terms that deter, penalize, or prohibit a worker from pursuing work or establishing a business across the U.S.
- The regulation makes allowances for existing agreements with senior executives, non-compete provisions associated with the sale of a business, and legal issues that began before the regulation takes effect on Sept. 4, 2024.
- The rule requires that employers must issue notices to their employees who are under non-compete clauses, letting them know that these provisions are no longer enforceable.
- Two lawsuits are contesting the rule, requesting a temporary hold on its start date. Both cases are moving quickly through the courts, and their outcomes could significantly impact the implementation of the FTC’s non-compete rule.
- If a stay is not issued by Aug. 1, 2024, employers should begin preparing for the FTC’s non-compete rule to take effect on Sept. 4, 2024. This means that unless the court issues a stay, the rule will proceed as planned, and employers will need to comply with the new regulations.
For additional details, please follow this link. https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes
This information is intended for informational purposes only and does not constitute legal advice. The information contained herein is not a substitute for professional legal counsel. For specific legal advice tailored to your situation, please consult your legal counsel.