By Michael Homans
May 2024
Early May’s flurry of news stories and legal alerts about the Federal Trade Commission’s “Final Rule” to ban most non-compete agreements seems designed to agitate employers and give hope to employees bound by such restrictions.
Our take: calm down, be patient, this “power grab” by the Executive branch is unlikely to survive court scrutiny.
Already, the U.S. Chamber of Commerce has filed a complaint in federal court in Texas seeking to block the new rule from going into effect (see the lawsuit here). As the Chamber notes, “Noncompetes have never been regulated at the federal level.”
It is not the Update’s job to predict future developments in the law, but we are willing to bet a free lunch with any reader that this “Final Rule” will not take effect in August of 2024, as currently scheduled. Our federal courts, including the Supreme Court, have been quick to strike down over-reaching by federal agencies, and for the FTC to bulldoze well-developed state laws regulating non-competes with an administrative rule would be virtually unprecedented and create a seismic shift in the federal-state balance of power.
That said, employers and employees should be keeping their eyes on rapid changes in state laws relating to non-competes and other restrictive covenants. At least 17 states now ban non-competes for all or some employees, with most of these limitations being adopted in recent years. HomansPeck tracks several databases on these laws and stands ready to assist clients on such matters nationwide. For particular advice as to your restrictive covenants, seek legal counsel.
Michael Homans is an employment lawyer and litigator based in Philadelphia and Wayne, Pennsylvania. He can be reached at mhomans@homanspeck.com or (215) 419-7477.