Can you have noncompetes with employees or not? For a long time, state law governed the enforceability of noncompetes and then in April 2024, the Biden administration’s Federal Trade Commission voted to ban noncompete agreements almost entirely. The rule faced immediate legal challenges, and employers were left scrambling to change agreements or abandon them entirely. Then we had a presidential election and change in administration, and now the Trump administration’s FTC has fully abandoned any efforts to support the ban. So, where does that leave the ban and what does it mean for employers wanting to use noncompete agreements?
Let’s back up. Back in 2024, the FTC enacted the ban to “address conduct that harms fair competition.” What exactly did the noncompete ban say? According to the FTC:
“[t]he final rule provides that it is an unfair method of competition… for persons to, among other things, enter into non-compete clauses [] with workers on or after the final rule’s effective date. With respect to existing non-competes—i.e., non-competes entered into before the effective date—the final rule adopts a different approach for senior executives than for other workers. For senior executives, existing non-competes can remain in force, while existing non-competes with other workers are not enforceable after the effective date.” FTC Noncompete Clause Rule (Final Rule)… In August of 2024, in Ryan, LLC v. Federal Trade Commission, a Texas district court set...
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