Tag: non-compete

FTC Non-Compete Ban Blocked

FTC’s Non-Compete Ban Blocked Nationwide

On August 20, 2024, the U.S. District Court for the Northern District of Texas enjoined the Federal Trade Commission’s (FTC) proposed non-compete ban. The decision, issued by U.S. District Court Judge Ada E. Brown, sets aside the FTC’s Non-Compete Rule.  So, the FTC cannot attempt to enforce the rule when it is scheduled to take effect on September 4, 2024.

The case is captioned as Ryan LLC (Plaintiff) and Chamber of Commerce of the United States of America, Business Roundtable, Texas Association of Business, and Longview Chamber of Commerce (Plaintiff-Intervenors) v. Federal Trade Commission, Civil Action No. 3:24-CV-00986-E.

Basis for Injunction

Judge Brown found two legal deficiencies in the promulgation of the FTC’s non-compete rule.

Exceeding Statutory Authority

The court found that the FTC exceeded its statutory authority under the Federal Trade Commission Act (FTC Act). The ruling emphasized that the FTC does not have the power to issue substantive rules that broadly prohibit non-compete agreements across all industries and employment levels. The FTC’s authority to prevent unfair methods of competition does not extend to the creation of sweeping, substantive regulations such as this Non-Compete Rule.

Arbitrary and Capricious Action

The court also determined that the FTC’s rule was arbitrary and capricious. The ruling criticized the FTC for imposing a one-size-fits-all ban on non-compete agreements without adequately considering less restrictive alternatives or providing a rational basis for the rule. Plus, the FTC’s reliance on certain studies was insufficient to justify such a broad prohibition. The judge noted that no state had enacted a rule as far-reaching as the FTC’s proposed regulation.

According to Judge Brown, “In sum, the Rule is based on inconsistent and flawed empirical evidence, fails to consider the positive benefits of non-compete agreements, and disregards the substantial body of evidence supporting these agreements.”

Status Quo Preserved

With the proposed non-compete ban blocked, employers may continue using non-competes to the extent allowed under applicable state law. Note that some states, such as California, already largely prohibit the enforcement of non-compete clauses.

While this ruling halts the FTC’s current efforts, it does not entirely close the door on federal regulation of non-competes. The FTC may attempt to appeal the decision (though the relevant appellate courts are not expected to reach a different conclusion). Alternatively, the FTC may revise its approach with a more limited non-compete ban. Some individual state legislatures will probably revisit potential non-compete bans as well.

 

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Employment Agreement Webinar

What’s in an Employment Agreement? (Webinar Recap)

On February 27, 2020, Julie Bastian and I presented a complimentary webinar called “What’s in an Employment Agreement?”. For those who couldn’t attend the live webinar, we’re happy to make it available for you to watch at your convenience.

In the webinar, we discuss:

  • Position and Duties
  • Compensation and Benefits
  • Term/Termination
  • Confidentiality and Non-competes
  • Intellectual Property Rights

There is no magic prescription for the perfect employment agreement. Each organization has different structures and operational needs. Your company might not use need employment agreements, or at least not for every employee.

This webinar discusses various common components of employment agreements to help you decide how to use them, if at all, in your business.

Don’t have time to watch the whole webinar right now? Click here to download the slides from the webinar.

Why You Should Watch “What’s in an Employment Agreement?”

It’s seldom an optimal strategy to take an employment contract off the shelf somewhere and use it across your organization. Each provision has potential practical and legal impacts. So you have to carefully think through what your business needs and adjust your agreements accordingly.

There are some basics found in most employment agreements. But even before you get there, you have to decide whether every employee should sign a written contract. In some industries, they’re very common. In others, not so much.

Employment agreements can range from one page to dozens. This webinar will help you match your needs and objectives to what you put on paper and ask employees to sign.

Do you even know what your employees are agreeing to right now? Use this webinar as a checklist to better understand what you can or can’t and should or shouldn’t expect employees to agree to in your situation.

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