Balch & Bingham LLP’s Post

🚨 Big News About Non-Competes 🚨 A decision in Federal District Court in Texas with nationwide effect confirms that the FTC's attempted ban on non-competes was unlawful. What does this mean for employers? 1️⃣ Take the September 4 compliance deadline off your calendar! Although there is a chance the rule could be resurrected on appeal in the future, for now, employers are in the clear. 2️⃣ You do not need to notify employees that their non-competes are ineffective. 3️⃣ If you've already provided employees notice that their non-competes are ineffective, you might consider sending a follow up notice retracting the previous communication. 4️⃣ You do not need to update your existing agreements to remove non-compete provisions. However, enforcement of non-competes may become more difficult and challenges to them more frequent, so consider reviewing your existing agreement to ensure they are necessary and reasonable to protect your business interests. 📨 Please don't hesitate to reach out with any questions or concerns!

You've likely heard about the FTC's ban on non-competes. Here's the main points: "Persons are prohibited from enforcing or entering into any non-compete with workers (other than senior executives) on or after the effective date; Persons may enforce existing non-compete agreements with senior executives but are prohibited from enforcing any new non-competes with senior executives after the effective date; The final rule includes an exception that allows a non-compete between the seller and buyer of a business; By the effective date, persons must notify affected workers that their non-compete is no longer in effect and will not be enforced." For those of you that have either been subjected to a non-compete or enforced a non-compete on someone, what are your thoughts? Does this level the playing field and give individual workers more authority and control over their careers? Does this mean that it'll be even harder to protect IP? Or something else? https://loom.ly/5UJZXmw

Poll Results are in! ✍ We asked: "The FTC's non-compete agreement, originally set to take effect on September 4th, 2024, would have impacted around 30 million workers. However, legal challenges from numerous firms have put the ban on hold, leaving its future uncertain. With the debate ongoing, there's still much discussion about whether non-competes should be banned nationwide or handled differently. What's your take on the issue? More info: https://lnkd.in/gWx9-KUg" You said: - 53% Ban non-competes nationwide - 47% Allow on a case-by-case basis - 0% No, non-competes should remain - 0% undecided 🌟 Thanks for voting! 💫 If you want to continue this discussion, comment below! 👇

As a follow up to the FTC's decision re non-competes, take note. If you are bound by a non-compete, you are not required to sign a modification. "Instead, under the final rule, employers will simply have to provide notice to workers bound to an existing noncompete that the noncompete agreement will not be enforced against them in the future. To aid employers’ compliance with this requirement, the Commission has included model language in the final rule that employers can use to communicate to workers." When does this take effect? "The final rule will become effective 120 days after publication in the Federal Register. Once the rule is effective, market participants can report information about a suspected violation of the rule to the Bureau of Competition by emailing noncompete@ftc.gov."

The FTC issued a final rule today to ban noncompetes nationwide. Under this final rule, the only existing agreements that are still enforceable are those with senior executives earning more than $151,164 annually and who are in policy-making positions. Employers are prohibited from entering into or enforcing new noncompetes with senior executives. Instead of noncompetes, the FTC sees trade secret laws and non-disclosure agreements as alternatives to protect employers' confidential information. This certainly is not the last word on noncompetes as the final rule will likely be litigated soon. Stay tuned for more analysis soon.

A few minutes ago, the FTC voted in favor of approving their ban against non-competes nationwide. In addition to being prohibited from signing non-competes moving forward, Employers with non-compete agreements now have a proactive obligation to notify those workers that the non-compete will not be enforced. TL;DR if you are an employer who asks employees to sign non-competes, call your lawyer asap so you can plan for compliance. The final proposed rule is available here (starts on page 561). https://lnkd.in/g53aQDMv

It’s parapHRased Friday!! What do you need to know about the changes to non-competes? In this video I breakdown what employers should be doing to be prepared for the potential of non-competes being banned. There are currently three lawsuits out there trying to pull the reins on the FTC’s new guidance but we still need to prepare for September 4th!

It remains to be seen what the future of non-competes will be. The legal challenges to the FTC ban will need to play themselves out first. Substantively, I think non-competes are bad. They distort the free market and limit all parties' options, which is ultimately to everyone's detriment. Any arguments in favor of non-competes can easily be addressed with less harmful measures. All the same, I'm not sure I like the idea of a ban, especially not in the form of regulation. Extensive use of executive power is certainly an unwelcome intervention. Preferably this would have been addressed in the legislature, if at all. Given that they appear to be universally hated by the people who sign them, it's surprising that the market hasn't organically eradicated them. Are we always so desperate that we'll sign anything to get a job? Perhaps most people understand that these clauses are already generally unenforceable. To be fully transparent, I am guilty of both signing non-competes and hiring others under non-competes (as company policy, not in my own business).

If you were wondering…the FTC rule effectively banning noncompetes is still alive (for now). Yesterday a Pennsylvania court declined to enjoin the rule. But, there are challenges still pending in courts in Florida and Texas with expected rulings before the rule becomes effective on September 4th. Here are a few things you can do to prepare in the event the rule survives: 1. Review your noncompetes to determine which, if any, will no longer be enforceable. 2. Consider entering into noncompetes with certain senior executives now. Once the rule becomes effective, you won’t be able to do that. 3. Prepare a notice to employees whose noncompetes will no longer be valid…yep, the rule requires that! Stay tuned for the latest developments. Happy to help if I can be a resource.

We all likely have heard about noncompetes being deemed illegal UNLESS one or more of the pending lawsuits change things. However, have you heard about this? That employers must notify current and former employees that the noncompetes are no longer valid? September 4th is the date when this will go into effect if nothing changes before then. This is interesting!