In our April 24, 2024 Employment Alert: Federal Trade Commission Issues Final Rule Banning Noncompetes, we explained that the new FTC Rule sought to ban most existing noncompete agreements. In July 2024, a federal district court in Texas granted a limited preliminary injunction staying enforcement of the FTC’s rule as to the parties in that case, pending a final ruling on the merits. The court reasoned that the FTC rule likely exceeds its congressional authority.
Still, the court did not issue a nationwide injunction barring enforcement of the rule but instead limited its ruling to the parties before the court. The court intends to make a final ruling by August 30, 2024, which may prohibit the implementation of the rule nationwide. In addition, there are other lawsuits challenging enforcement of the rule.
Even though the issue is in flux, the following action in consultation with legal counsel may serve employers well.
- Prepare, but wait to send, the required notice to employees or former employees.
- Form for the required notice is available on the FTC’s website: https://www.ftc.gov/legal-library/browse/rules/noncompete-rule
- Review all existing noncompetes to assess whether they run afoul of the FTC rule, should it go into effect.
- Review all handbooks and workplace policies that address noncompetes.
- Be cautious about attempting to enforce a noncompete, particularly those with non-executives.
- Review alternatives to noncompetes, such as agreements that protect trade secrets or confidential information and non-disclosure agreements.
Disclaimer: This material is provided for informational purposes only. It is not intended to constitute legal advice, nor does it create a client-lawyer relationship between Galloway and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdictions.
Doris Bobadilla, Esq.
Licensed in Louisiana, Mississippi, Texas, Florida
dbobadilla@gallowaylawfirm.com | 985-674-6680
Wendell Hall, Esq.
Licensed in Louisiana and California
whall@gallowaylawfirm.com | 985-674-6680