As mentioned in our prior post, the Federal Trade Commission (FTC) enacted a rule in April 2024 banning most non-compete agreements nationwide, aiming to boost worker mobility and competition which is scheduled to take effect on September 4, 2024.
On July 3, 2024, a Texas court issued a limited preliminary injunction, temporarily halting the implementation of the FTC’s non-compete rule for the plaintiffs and plaintiff-intervenors in the lawsuit (Plaintiff Ryan LLC and Plaintiff-Intervenors the US Chamber of Commerce, Business Roundtable, Texas Association of Business, and Longview Chamber of Commerce). However, the court declined to issue a nationwide injunction and has delayed ruling on this matter until later this month, ahead of the scheduled effective date. Right now, this means that only those who were parties in the lawsuit may continue to use non-compete agreements with their employees beyond September 4.
Next Steps
The Texas court’s decision has created a wait-and-see situation for employers across the country, but a nationwide injunction is still a possibility. Until the court weighs in on a nationwide injunction, employers should wait to issue any notices to employees about the enforcement of said agreements but should at least have assessed existing agreements and consider the potential impact on employees who are currently subject and may need to be notified.
Even with the FTC’s rule on hold, individual state laws governing non-compete agreements remain in effect.
Employers who wish to maintain other types of trade secrets or confidentiality agreements should ensure that these agreements are reviewed and updated by their legal counsel.
HR Works will continue to monitor this topic and provide updates as they are available.
