New Lawsuit Challenges the Federal Trade Commission banning Non-Competes

Earlier this week the Federal Trade Commission regulators issued regulations banning non-compete agreements for all for-profit employers under the final rules which are meant to take effect in August 2024.  Most employees of for-profit companies would be able to leave their current employment without any restriction of going to work for a competitor even if the employee had signed a non-compete agreement.  The “economy-wide” change by the FTC is the first time in half a century that such a wide-spread regulation had been issued for the majority of the businesses in the United States.  

However, on Wednesday, two powerful business lobby groups filed suit against the Federal Trade Commission seeking to overturn its ban on non-compete agreements.  The suit was filed in Texas federal court.  The suit was brought by the Chamber of Commerce and the Business Roundtable along with other business groups.  The lawsuit maintains that the FTC overstepped its authority by issuing the rule because the rule reflects “arbitrary and capricious exercise of the Commission’s power.  The argument of the Chamber is that the FTC rule violates the Major Questions Doctrine which the U.S. Supreme Court established which prohibits federal agencies’ ability to craft new regulations.

While legal challenges against the Final Rule play out, employers should review their existing noncompete agreements with counsel to ensure compliance and to keep abreast of new developments. In addition, employers should assess whether their business interests can be protected by agreements covering non-disclosure and confidentiality of employer information, non-interference, and non-solicitation of customers and employees.

Employers should also ensure that all company trade secrets are properly safeguarded, shared with only those who have a business need to know, and are properly secured to ensure their secrecy. If an employer’s handbook contains a noncompete policy, the handbook should be reviewed to determine if changes must be made and whether notice should be given as provided in the Final Rule.

For more information and guidance on the non-compete Rule, please contact DBL Law.

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Additionally, this week, the Department of Labor issued a final rule on overtime pay.  The DOL final rule would elevate minimum salary level from $35,568.00 per year to $43,888.00 on July 1, 2024, and again to $58,656.00 in 2025.  It is expected that this new rule will also be challenged in federal court.  DBL Law will keep you updated as further developments occur.  Please reach out to one of our labor and employment attorneys if you have any questions.