Non-competes were part and parcel of business life for many years. So you may have many employees in your workforce who signed them when they started working for you.
You may have heard of the proposals to ban non-competes, so what is the current situation?
The majority of non-competes are now invalid
In April 2024 the Federal Trade Commission (FTC) issued a final ruling to ban non-competes. The only exception they made was for those already signed by senior executives, which amounts to less than one percent of the total workforce. All others would be invalid, and no new ones could be made, not even for senior executives.
Challenges are already afoot
Unsurprisingly, not everyone was happy about the ban on non-competes, so challenges to the FTC’s ruling were to be expected. In August of this year, a district judge in Northern Texas upheld a challenge that claimed the FTC did not have the authority to ban non-competes. By contrast, a district judge in Pennslyvania dismissed a similar challenge, ruling that the FTC was indeed within its right to bring the ban. What will happen next is unclear.
What should employers do?
Probably the best thing you can do as a business owner is to review why you have non-competes (if indeed you still do). Are they just something you used because that’s what everyone did? Or do you still feel they are essential, and if so, who for and why?
Canceling any existing ones without prompting could help you gain the goodwill of employees. There may be other, better ways to protect the things you were hoping a non-compete would protect. Getting legal help to understand your options can help you make appropriate decisions that can better protect your business without having to worry about whether the FTC ruling will stand or not.
