The Future of Non-Compete Agreements: FTC's Final Rule and Its Implications

In May, the Federal Trade Commission (“FTC”) published a controversial Non-Compete Clause Final Rule (the “Final Rule”) that impacts almost all non-compete agreements between companies and their employees and contractors – including those already in existence.  That Final Rule is scheduled to go into effect on September 4, 2024 (the “Effective Date”).

FTC Outlaws Most Non-compete Agreements Effective September 4, 2024.

So-called “non-compete agreements” that limit or prevent workers from competing with their former employers for a period, are commonly used by businesses to protect their proprietary information and client relationships.  In fact, the FTC states that approximately 30 million employees are covered by non-compete agreements. 

The FTC claims that non-compete clauses are an 'unfair method of competition.根据他们的研究, 这些条款使工人的工资平均减少5-10%, 扼杀新企业的诞生, 通过限制工作流动性来剥削工人, 阻碍经济自由.  As such, the FTC’s rule bans employers from entering non-compete clauses with their employees and independent contractors. The Final Rule also voids existing non-compete provisions, except for:

1. 担任决策职位的高级管理人员.
2. Executives with a total annual compensation of at least $151,164 in the preceding year.

Once a non-compete agreement with a senior executive expires, it cannot be renewed.

The Final Rule also requires that Employers send notice by the Effective Date to each employee with an existing non-compete clause that will be voided by the Final Rule that states that the ““worker’s non-compete will not be, 在法律上是不可能的, 对工人强制执行.”  If an employee violates an existing non-compete clause prior to the Effective Date, 雇主仍然可以要求强制执行.

The only total exception to the Final Rule is for non-compete clauses made as part of the bona fide sale of a business.  因此, if a business owner enters into such an agreement as part of the sale of their business, 在生效日期后仍可强制执行.

Legal Challenges and Court Rulings Since the Final Rule Was Published

自《现金网官网》公布以来, several lawsuits have been filed in federal courts challenging the FTC’s authority to ban non-compete clauses.  作为这些西装的一部分, the plaintiffs have requested that the court issue an injunction prohibiting the Final Rule from going into effect on the Effective Date. 

2024年7月3日.S. District Court for the Northern District of Texas issued a preliminary injunction staying enforcement of the Final Rule against the plaintiff in the lawsuit.  这样做的时候, the court stated that the FTC’s effort to implement the Final Rule likely exceeded its congressional authorization under the FTC Act and constituted an arbitrary and capricious approach to the issue of regulating non-competes.  然而法院并没有发布完整的禁令, it has indicated that it will issue a final ruling on the merits of matter by August 30, 2024.  That ruling could contain an injunction prohibiting the enforcement of the Final Rule nationwide.

The U.S. District Court for the Eastern District of Pennsylvania was also asked to issue an injunction stopping enforcement of the Final Rule.  7月23日, 2024, 法院做出了有利于联邦贸易委员会的裁决, arguing that the FTC Act clearly empowered the agency to make by procedural and substantive rules.  因此，法院拒绝申请禁令. 

There is also a challenge pending in Florida, but it is procedurally far behind the other two cases.

未来的设想:公平交易委员会的禁令会被执行吗?

此时此刻, there is still a possibility that a court will issue an injunction preventing the FTC from enforcing the Final Rule on the Effective Date.  The Texas court may issue a nationwide injunction by its self-imposed deadline on August 30.  Also, the parties to the Texans and Pennsylvania cases could appeal the matter up to their respective Courts of Appeal.  直到他们知道, however, 大多数竞业禁止协议将无法执行, and businesses will be required to provide notice to their employees.

这篇博客文章最初发表后的最新更新

8月20日, 2024, the federal court in the Northern District of Texas ruled that the Federal Trade Commission (“FTC”) exceeded its statutory authority in its rulemaking that would have resulted in an effective ban on noncompetition agreements.  The court also issued an injunction permanently blocking the FTC from enforcing the ban nationwide, 就在联邦贸易委员会的规定生效前几周.  The FTC is expected to appeal the court’s decision to the Fifth Circuit Court of Appeals.  The Texas court’s opinion conflicts with the federal district court in the Eastern District of Pennsylvania, 本月早些时候，哪个国家支持最终裁决.

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