NEWS: A federal court in Texas has ordered that a Federal Trade Commission (FTC) rule, which would have effectively banned non-compete agreements, cannot go into effect or be enforced. The court’s order applies nationwide.
A non-compete is an agreement by a worker not to engage in competition with the employer for a time after the worker’s employment ends. Some Wisconsin credit unions might include non-compete clauses in their contracts with certain employees.
The FTC is expected to appeal the decision, but for now, the rule is on hold until higher courts weigh in. The rule was to have taken effect yesterday, Sept. 4, 2024.
According to The League’s outside attorneys, the Husch Blackwell law firm, “there is no current need to modify existing non-compete agreements or send out a notice (described in the FTC rule) to current and former employees regarding any such agreements.”
As explained in this Compliance Courier, the FTC rule, which it issued in April, would largely prohibit new non-compete agreements and force existing non-competes to be rescinded.
The rule has some limited exceptions. For example, it would “grandfather” existing non-competes for a small group of highly compensated executives. But the rule would bar employers from entering into new non-competes after the rule takes effect.
The FTC has said it believes that non-compete agreements are unfair because they reduce competition in labor markets.