Final Countdown To September 4th Ban On Non-Compete Agreements

As reported in prior posts, in April 2024 the Federal Trade Commission (FTC) voted 3-2 to approve a final rule banning noncompete agreements with virtually all workers beginning 120 days after publication of the rule in the Federal Register (i.e., on September 4, 2024). The new rule invalidates existing non-compete agreements with virtually all workers except a limited group of senior executives.  Moreover, the new rule requires employers to send a clear and conspicuous notice to affected workers, by the effective date, stating that the worker’s noncompete clause will not and cannot be legally enforced.

There have been a number of legal challenges to the noncompete ban.  However, thus far, none have been successful in securing an order enjoining, staying and/or invalidating the noncompete ban for all employers. Several courts including the U.S. District Court for the Northern District of Texas enjoined the FTC from enforcing its noncompete ban and stayed the ban as to the parties in specific individual lawsuits, but have refused to issue a nationwide injunction or stay that would apply to other employers. At this point, the best hope for an order staying, enjoining and/or invalidating the noncompete ban for all covered employers before the noncompete ban is set to take effect on September 4, 2024, is in the Texas lawsuit, where the court has promised a ruling on the merits by August 30, 2024. Unfortunately, that date (the Friday before Labor Day) provides little comfort for all other covered employers, given that the noncompete ban is set to take effect the following Wednesday, September 4, 2024.

With the clock ticking down to September 4, 2024, other covered employers may also seek injunctions or stays of the noncompete ban. But employers should assume that the noncompete ban will stay in place and should take the following steps, if they have not done so already:

• Identify a designated individual or individuals to speak on behalf of the company regarding the rule and develop consistent messaging to workers;
• Work with counsel to review agreements with current and former workers to determine which agreements would fall within the noncompete rule;
• Work with counsel to craft the notice that must be sent to affected workers on or before the effective date;
• Create a list of current and former employees to whom notice should be sent with their last known home addresses, and
• Work with counsel to review existing agreements to assess potential changes to those forms for use after the effective date.

Feel free to contact us with specific questions. You can learn more about our products and services on this website or contact one of our attorneys, Jay Rollins or Debra Schwartz by calling  404.844.4130.