In a widely expected move following President Donald J. Trump’s 2024 re-election, the Federal Trade Commission (FTC) voluntarily dismissed its appeal of a ruling that halted enforcement of a Biden-era FTC rule banning most employee non-compete provisions.
As we previously reported, in August 2024, a U.S. District Court in Texas struck down the then-pending ban, concluding the FTC rule exceeded the FTC’s authority.
What is Next?
In the short term, companies nationwide can expect the FTC to pivot from broad-ranging non-compete regulation toward a more nuanced, case-by-case approach. We also expect an uptick in non-compete-related activity from state legislatures, several of which--including New Jersey--are currently considering bills limiting or outright banning non-competes. As we previously reported, many states, including California, Colorado, Illinois, North Dakota, Oklahoma, Massachusetts, Washington D.C., Oregon, Minnesota and Washington, already ban or heavily restrict the use and administration of non-compete covenants. Companies with employees and contractors in states where non-compete covenants are banned or heavily restricted must carefully review their restrictive covenant agreements for compliance with state law and consider whether to shift their focus to confidentiality and non-solicitation agreements to protect their confidential information, business relationships and their investment in their workforce.
Quarles will continue to monitor the status of non-compete related developments at both the state and federal level.
