Trump Administration Stops Appeals of FTC Noncompete Ban

During the final year of the Biden administration, the Federal Trade Commission (FTC) issued a rule that would have barred the use of most employee noncompete agreements throughout the United States. While some praised the move as a way to protect the rights of workers, employers worried that without the ability to impose restrictions on former employees, their trade secrets, client relationships and other business interests might be put at risk. Legal efforts challenging the noncompete ban have not been resolved yet, but it appears that the new administration might be abandoning the 2024 rule. 

On March 7, the FTC filed motions in the Fifth and Eleventh Circuit Courts of Appeals, requesting a 120-day hold on its appeals in two separate cases challenging the noncompete rule. The agency stated that the pause would allow the government to provide the courts with a status report regarding next steps. Many observers believe that the appeals will be dropped and companies will be allowed to place reasonable limits on the professional activities of ex-employees. 

In addition to concerns about the merit of a ban on noncompete agreements, new FTC Chairman Andrew Ferguson has also questioned whether his agency has the authority to establish such a sweeping mandate. According to the FTC, approximately one in five workers is subject to one of these agreements, sometimes referred to as restrictive covenants.

Even if the federal government revokes the blanket ban, companies that wish to require noncompete agreements still must use great care to see that the terms are enforceable. Employees must receive consideration to make the agreement valid. Furthermore, restrictions must be reasonably connected to legitimate business interests. Noncompete provisions cannot be excessive in their duration or geographic scope. Likewise, the specific prohibited activities should be narrowly tailored so that a former worker can make a living following their departure.  

The law firm of H. Clay Parker, Esq. in Orlando represents both employers and employees in matters relating to Florida noncompete agreements. Whether you’re looking to create a document for your workers, have been asked to sign a noncompete agreement or are engaged in a dispute over the enforcement of a restrictive covenant, we can help. For an appointment, please call [ln::phone] or contact us online.