The national non-compete ban that was set to go into effect on Sept. 4 has been struck down by a Texas court, and Rachel Demarest Gold, director of Employment Law Practice at Abrams Fensterman, explains what this ruling means for employers in New York.
A non-compete is a contractual agreement that restricts an employee from working for competitors or starting a similar business for a specified period after leaving their current employer. These agreements are typically used to protect a company’s trade secrets, customer relationships and proprietary information. However, non-competes are increasingly being scrutinized for limiting worker mobility and suppressing wages.
The Federal Trade Commission (FTC) first announced the nationwide ban in April 2024, citing the need to promote competition and protect workers’ rights to change jobs or start businesses without restrictions. The FTC argued that non-competes suppress wages, stifle innovation, and harm the economy by preventing the creation of more than 8,500 new businesses annually.
The rule was met with significant opposition and led to the legal challenge that resulted in Judge Ada Brown of the Northern District of Texas ruling that the FTC exceeded its authority in issuing the ban. The court found the rule to be arbitrary and capricious, striking it down before it could take effect.
Despite the national ruling, Demarest Gold explained that non-competes are already largely unenforceable in New York.
“New York courts...
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