Labor & Employment Law I APRIL 25, 2024

Federal Trade Commission Bans Noncompetes

You might have seen the news that the Federal Trade Commission (FTC) has banned noncompetes. However, not so fast. . .

The new ban goes into effect in 120 days, and for senior executives, existing noncompetes can still remain in force. Further, after the new law is published in the Federal Register, it will become eligible to be repealed by Congress within 60 days of its publication under an expedited procedure provided through the Congressional Review Act. It is expected that members of Congress will move to repeal the new law within the allotted timeframe. The rule will also likely face multiple legal challenges once it is a final agency action, including from the U.S. Chamber of Commerce, which has already indicated its intention to sue.

Given the recent successes of many petitioners who are challenging what they perceive as government overreach, this seems the most viable method to stop or slow down the need to implement the requirements in the final rule. It is likely that various petitioners will challenge the rule on several grounds, including:

(1) The FTC exceeded its authority under the Federal Trade Commission Act;

(2) The FTC requires additional legal authority from Congress allowing for such a resolution, invoking the major questions doctrine; and

(3) The rule unlawfully infringes on state laws regarding employment and contracts.

Accordingly, until the legal landscape becomes clearer - which may take years - there is no need to change current or upcoming employment agreements.

For more information about the FTC noncompete ban, please contact Robert Rosenthal of Howard & Howard Attorneys PLLC.

Kady Volmering
PR and Communications Coordinator
[email protected]