FTC Noncompete Ban: Steps to Take Now
As we draw closer to the September 4, 2024 implementation date of the Federal Trade Commission’s ban on noncompete agreements (the “FTC Ban”), employers across the country are evaluating their obligations under the new rule as well as the likelihood that the FTC Ban will go into effect. As previously reported, multiple court challenges have been filed, and it remains possible that a court may issue an injunction halting or limiting the implementation of the FTC Ban prior to September 4, 2024. A U.S. District Court in Texas has signaled that it intends to issue a ruling by August 30, 2024, and many observers and commentators believe this ruling has the potential for the issuance of a nationwide injunction.
Employers are understandably reluctant to begin complying with the FTC Ban, given the possibility of an injunction. Nevertheless, employers will need to quickly get ready for compliance in the event court intervention does not happen. Until we have any type of court ruling, much uncertainty will remain. During this period of limbo, we believe that employers can take some efficient steps now to prepare for the possibility of a September 4, 2024 implementation date:
- Conduct an inventory of existing agreements to prepare a definitive list of agreements containing non-competition provisions that would be affected by the FTC Ban;
- Prepare to issue the required written notices (that noncompetes are no longer in place) by the September 4 implementation date. A model notice can be found on the FTC website here. Care should be taken here to ensure that these notices do not invalidate other provisions in existing agreements that are not covered by the FTC Ban (e.g. confidentiality provisions, non-solicitation provisions, etc.).
- Consider whether there are senior executives making more than $151,164 who need to be signed up to noncompete agreements prior to the September 4 implementation date. The FTC Ban permits noncompete agreements for these qualifying senior executives – but for a limited time only. These agreements must be executed before the September 4, 2024 implementation date.
- Consider, on a going forward basis, whether adequate protection can be gained by carefully drafted confidentiality agreements and non-solicitation agreements (where not prohibited by state law).
Note: The FTC Ban will not apply to qualifying common carriers. More specifically, the FTC does not have rulemaking authority over certain common carriers engaged in common carrier activities. However, with the sunset of the ICC and the elimination of the distinction between common carrier and contract carrier authorities issued by the U.S. Department of Transportation, the full extent to which the FTC Ban applies to motor carriers is unclear – and will likely be debated.
We will continue to monitor and report on further developments related to the FTC Ban.
News from Scopelitis is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.
FTC Noncompete Ban: Steps to Take Now
As we draw closer to the September 4, 2024 implementation date of the Federal Trade Commission’s ban on noncompete agreements (the “FTC Ban”), employers across the country are evaluating their obligations under the new rule as well as the likelihood that the FTC Ban will go into effect. As previously reported, multiple court challenges have been filed, and it remains possible that a court may issue an injunction halting or limiting the implementation of the FTC Ban prior to September 4, 2024. A U.S. District Court in Texas has signaled that it intends to issue a ruling by August 30, 2024, and many observers and commentators believe this ruling has the potential for the issuance of a nationwide injunction.
Employers are understandably reluctant to begin complying with the FTC Ban, given the possibility of an injunction. Nevertheless, employers will need to quickly get ready for compliance in the event court intervention does not happen. Until we have any type of court ruling, much uncertainty will remain. During this period of limbo, we believe that employers can take some efficient steps now to prepare for the possibility of a September 4, 2024 implementation date:
- Conduct an inventory of existing agreements to prepare a definitive list of agreements containing non-competition provisions that would be affected by the FTC Ban;
- Prepare to issue the required written notices (that noncompetes are no longer in place) by the September 4 implementation date. A model notice can be found on the FTC website here. Care should be taken here to ensure that these notices do not invalidate other provisions in existing agreements that are not covered by the FTC Ban (e.g. confidentiality provisions, non-solicitation provisions, etc.).
- Consider whether there are senior executives making more than $151,164 who need to be signed up to noncompete agreements prior to the September 4 implementation date. The FTC Ban permits noncompete agreements for these qualifying senior executives – but for a limited time only. These agreements must be executed before the September 4, 2024 implementation date.
- Consider, on a going forward basis, whether adequate protection can be gained by carefully drafted confidentiality agreements and non-solicitation agreements (where not prohibited by state law).
Note: The FTC Ban will not apply to qualifying common carriers. More specifically, the FTC does not have rulemaking authority over certain common carriers engaged in common carrier activities. However, with the sunset of the ICC and the elimination of the distinction between common carrier and contract carrier authorities issued by the U.S. Department of Transportation, the full extent to which the FTC Ban applies to motor carriers is unclear – and will likely be debated.
We will continue to monitor and report on further developments related to the FTC Ban.
News from Scopelitis is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.