What is a non-compete agreement? A non-compete agreement is an agreement that prevents employees from working with competitors or starting a competing business for a specified period of time. These agreements are commonly used to protect a company’s trade secrets, confidential information, and customer relationships.
The FTC’s Non-Compete Ban
You might have heard that the Federal Trade Commission (FTC) proposed a ruling that would significantly limit the use of non-compete agreements for both employees and independent contractors. The FTC rule was intended to generate new businesses, bolster innovation, and protect worker freedoms including the freedom to change jobs and increase wages. The FTC claimed that noncompete agreements often exploit workers by forcing workers to stay at a job they want to leave or bear significant harm in order to comply with the terms of the noncompete including relocating, leaving the field or industry, or leaving the workforce entirely or risk incurring and defending against costly litigation. While the FTC did create some exceptions from the rule, the majority of non-compete agreements would be deemed invalid and unenforceable.
FTC’s Ban Blocked
While the FTC’s non-compete ban was set to take effect on September 4, 2024, on August 20, 2024, U.S. District Judge Ada Brown in Texas stayed the FTC’s non-compete ban. As such, the FTC cannot enforce the ban in any state. Judge Brown stated that the rule was “arbitrary and capricious” as it was unreasonably overbroad without explanation and the FTC exceeded its authority.
What Now?
There is much anticipation that this legal debate is not over. The FTC may appeal the ruling or the FTC might revise the ban. Nonetheless, while employers are currently do not have to worry about complying with the FTC’s non-compete ban, that does not mean that it may not make a reappearance in the future in another shape or form. Additionally, employers still need to be compliant with state laws as several states have banned non-competes including California. In comparison, Florida has traditionally been very pro non-compete but there are still specific rules and requirements for such restrictions to be enforceable.
If the legislature or a new ruling enforcing a non-compete ban comes into effect, such ruling would have significant effects in Florida especially on industries such as technology, healthcare, real estate, and tourism. Companies that depend heavily on specialized knowledge or customer relationships may feel the most impact. Conversely, smaller businesses and startups could benefit from a more open talent pool, enabling faster growth.
We strongly encourage employers to review their contracts and non-compete provisions and agreements to ensure that they are enforceable. We also suggest that businesses consider implementing other legal protections, such as non-disclosure agreements (NDA), to safeguard sensitive information and client relationships. No matter what the future holds for non-competes, KEW Legal can help you stay informed and proactively assist your business navigate this evolving legal landscape to protect your business. For more information, you can contact us here
