Announcement of the new rule has triggered multiple legal challenges that could delay its enforcement.
Going forward, employers are prohibited from entering into new non-competes, even for executives, and must notify workers bound by existing agreements that the non-compete provisions will not be enforced. The FTC is of the opinion that this rule will alleviate burdens on workers and foster a more dynamic and competitive labor market.
The rule includes a few exceptions, such as existing agreements with senior executives and non-competes that exist as part of the sale of a business.
Legal Challenges.
The FTC announcement triggered immediate legal challenges. One federal lawsuit seeks to vacate the final rule on the grounds that the FTC does not have the authority to issue the rule and that the rule itself is unconstitutional. Another suit, filed by the U.S. Chamber of Commerce, seeks an injunction that would halt the enforcement of the final rule or extend the effective date of enforcement.
Alternatives.
Employers are encouraged to explore alternative methods to protect their interests, such as trade secret laws and non-disclosure agreements (NDAs). These mechanisms offer legal safeguards for proprietary information without the restrictive nature of non-competes.
Related articles:
Customer List Not Necessarily a Trade Secret
Employee Misuse of Confidential Information