ELDI ALERT: JUDGE BLOCKS FTC RULE BANNING NONCOMPETES

8/21/2024 | Articles & Alerts, News & Resources

Yesterday, a Federal Judge in Texas issued a “nationwide” injunction banning the Federal Trade Commission (FTC) from enforcing the FTC’s rule which would have banned employers from entering into or enforcing noncompete agreements with employees.  The rule was scheduled to take effect on September 4, 2024.  Yesterday’s ruling prevents the FTC from taking any action to enforce that rule.  The FTC is deciding whether to appeal but for now, employers are permitted to enter into and enforce noncompete agreements with new and existing employees.

IMPORTANT CAVEAT to employers:  The ruling does not prohibit courts from evaluating whether to enforce noncompete agreements on a case-by-case basis.  Employers still should ensure that noncompete agreements are limited in scope to the extent possible in order to improve the chances that a court will enforce a noncompete.  Courts are unlikely to enforce noncompete agreements which require an employee to leave the employee’s chosen industry if the employee wants to change jobs.  Employers also should focus on confidentiality, non-solicitation, and invention restrictions as an effective means to protect employers’ legitimate business interests and intellectual property.

Employers who want to ensure that they are protected to the maximum extent possible under the law should review their existing confidentiality/noncompete agreements and revise those agreements to protect the specific business interests of the employer.  For more information or assistance, please contact Kimberly L. Russell, Esquire at (610) 941-2541 or krussell@kaplaw.com.

Related Practices: Employment Law, Employer Compliance Assistance