LYNCH DALLAS LEGAL UPDATE | NATIONWIDE INJUNCTION ALLOWS NON-COMPETE AGREEMENTS
August 22, 2024
Earlier this year, the Federal Trade Commission (FTC) announced a rule banning employers from using non-compete agreements. The rule was set to be implemented on September 4, 2024. However, on August 20, a federal court in Texas placed a nationwide injunction prohibiting the FTC from enforcing its non-compete ban. The judge found that the FTC acted outside of its authority in creating such a ban and that the ban itself was too broad for enforcement. For more details about the case, you can read the opinion here. Because the injunction is in place nationwide, employers may continue the use of non-compete agreements as allowed under state law.
We do, however, anticipate that the Texas decision will be appealed, and the outcome of that appeal is uncertain. Because the injunction could be lifted, we recommend that employers using noncompete agreements start gathering data on which employees have such agreements. If the injunction is lifted, employers must:
- Stop including non-competes in future employment contracts, paperwork, or websites;
- Give notice to current and former employees that their non-compete agreements are unenforceable; and
- Stop enforcing non-competes going forward for employees other than for senior executives.
The FTC has provided model language for providing notice, which you can access here.
We will continue to monitor the FTC’s non-compete ban issue and will provide updates as the challenges in court continue. Employers with questions about the nationwide injunction should speak with their employment and labor attorneys.
