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• A Texas court has prohibited the FTC’s non-compete ban from going into effect, for now, and litigation will continue into the future.
• Employers do not need to distribute previously required notices and can still enter into new non-compete agreements.
• Employers should re-examine their non-competes and consider focusing on employee retention rather than post-employment restrictions. 

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Yesterday evening, a Texas court permanently enjoined the FTC’s non-compete ban from going into effect on September 4, 2024. That said, the fight is hardly over.

There are also cases pending in Pennsylvania, Florida, and another in Texas. While the Florida court took a similar stance to Texas, Pennsylvania green-lighted the rule. So, we can expect continued litigation and appeals.

As of right now, the FTC rule will not take effect in two weeks. That means employers do not need to send out the required notices and can still enter into new non-competes. That does not mean, however, that employers should write off the FTC rule entirely. As mentioned, with the circuit split, the matter is ripe for appeal and the rule could ultimately survive. And given the general distaste for non-competes at present, courts are hesitant to enforce them, as we’ve seen firsthand.

Practically speaking, employers should look at their current non-compete agreements to check for overly broad language and consider switching to other tools not restricted by the rule. For example, non-solicitation clauses that protect your client and employee base do not fall within the scope of the FTC, but can offer similar business protection. Employers may also want to focus on retention strategies (rather than post-employment restrictions), such as stock options, bonus incentives, and training/education repayment plans.

Our team is available to help you strategize and implement a plan that works best for you and your workforce. 

This article was co-authored by Jane Sensibaugh, Law Clerk