The Current State of the FTC Ban on Noncompete Agreements

In April 2024, the Federal Trade Commission's (FTC) issued a rule declaring noncompete agreements in employment an unfair method of competition under Section 5 of the Federal Trade Commission Act. The rule purported to prohibit employers from entering into noncompetes with workers, both prospective and current, except in limited situations. This would be a national ban that would supersede state laws. The rule was set to take effect on September 4, but legal battles have delayed its enforcement. Court injunctions have been issued, and the FTC is pursuing appeals. 

Two separate legal challenges have resulted in injunctions against the FTC's rule:

1. Ryan LLC v. FTC (Northern District of Texas) — In August, the court issued a nationwide injunction blocking the rule. The FTC appealed this decision to the U.S. 5th Circuit Court of Appeals on October 18. If the 5th Circuit upholds the injunction, the FTC will be unable to enforce the ban against any employer nationwide.
2. Properties of the Villages, Inc. v. FTC (Middle District of Florida) — This case led to a more limited ruling, staying the ban only with respect to the specific plaintiff. The FTC has also appealed this decision, filing with the U.S. 11th Circuit Court of Appeals.

These appeals are likely to take months, and if either case escalates to the Supreme Court, it could be years before a definitive resolution is reached.

Until the legal disputes are resolved, Florida employers remain bound by state law regarding noncompete agreements. Florida has traditionally upheld the enforceability of noncompetes, provided they comply with state statutory requirements under Florida Statutes Section 542.335. A noncompete must be based on the following:

1. Legitimate business interest — Employers must demonstrate that the noncompete serves a legitimate business interest, such as protecting trade secrets, confidential business information, or substantial relationships with customers.
2. Reasonableness in scope — Noncompetes must be reasonable in duration, geographical area, and the scope of restricted activities. Typically, Florida courts presume noncompetes lasting six months to two years as reasonable for employees, though longer durations may apply to key executives or owners of sold businesses.

In light of the current uncertainty around the FTC’s ban, Florida employers should continue to ensure their noncompetes comply with state law requirements. However, employers should also stay informed about developments in the federal cases, as any eventual enforcement of the FTC’s ban would override state law and nullify existing noncompetes. As dedicated Florida business attorneys, we are tracking the legal developments in this area and will continue to provide comprehensive counsel for our clients.

Clay Parker, Esq. in Orlando advises Central Florida clients on the formation, review and enforcement of noncompete agreements. Please call [ln::phone] or contact us online. In cases related to civil or business litigation, we offer a $50 initial consultation.