Waldron & Schneider

FTC’s Final Rule – Are Non-Competes Completely Unenforceable?

The Federal Trade Commission (FTC) issued a final rule finding non-compete clauses in connection with employment relationships to be in violation of Section 5 of the FTC Act and bans employers from entering into or enforcing non-compete clauses nationwide. The FTC issued this rule on April 23, 2024, and then published it in the Federal Register on May 7, 2024.  Barring legal further, actions, the final rule is scheduled to go into effect September 4, 2024.  This new rule is not applicable in any court considering the enforcement of an existing non-compete agreement which is filed before the rule goes into effect.

This new rule applies to private sector employers unless specifically exempted. Exemptions are provided for business including banks, savings and loan associations, Federal credit unions, common carriers air carriers, entities covered by the Packers and Stockyards Act of 1921, and most non-profit organizations.

The FTC has provided some carve outs where non-compete clauses may still be enforceable in accordance with state law. These carve outs provide an exception for enforcement of a non-compete agreement included as a term in the bona fide sale of a business.  There is also a narrow except for the continued enforcement of existing non-compete clauses with certain senior executives which are entered into prior to the September 4, 2024 enforcement date, although entering into new ones will be prohibited after that point. A senior executive, as defined by the FTC’s final rule, is a worker who is in a policy-making position and earned at least $151,164.00 the preceding year.

There is still considerable debate and litigation regarding the authority of the FTC to enforce its new ruling. Two of the five FTC commissioners along with the US Chamber of Commerce do not believe that the FTC has the power to make all non-compete clauses nationwide unenforceable. There are also three court cases challenging FTC’s authority regarding this rule. The plaintiff in one case pending in the North District of Texas argues that the rule contravenes the FTC Act, violates the Constitution, and is arbitrary, capricious, and unlawful. This case should hopefully provide clearer guidance on the future effectiveness of non-competes in Texas.

The attorneys at Waldron & Schneider, PLLC are well versed in employment matters, including the enforcement of confidentiality, non-solicitation, and non-compete agreements. If your business has questions regarding any of these matters and the best options to protect your valuable work product, please call to make an appointment with one of our attorneys today. 

The legal information in this blog entry is not intended to be a substitute for seeking personalized legal advice from an attorney licensed to practice in your jurisdiction. Further, nothing contained in this article is intended to create an attorney-client relationship with any reader. This article and website are made available by Waldron & Schneider for educational purposes only and to give basic information and a general understanding of the law, not to provide specific legal advice. By using this website you understand that there is no attorney client relationship between you and Waldron & Schneider. The article and website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. For more information or questions you can contact us and one of our attorneys will be in touch soon.

  • Recent Posts

  • Categories

  • Comments Box SVG iconsUsed for the like, share, comment, and reaction icons

    Waldron & Schneider was proud to be a sponsor of the Clear Lake Chamber of Commerce Annual Bowling Tournament. WS had two teams & it was a great firm bonding event. ... See MoreSee Less

    Waldron & Schneider was proud to be a sponsor of the Clear Lake Chamber of Commerce Annual Bowling Tournament. WS had two teams & it was a great firm bonding event.Image attachmentImage attachment+5Image attachment

    Partner Richard Simmons with Bridget Bear (Director of Sales and Marketing at South Shore Harbor Resort) at the monthly Clear Lake Area Chamber of Commerce Luncheon ... See MoreSee Less

    Partner Richard Simmons with Bridget Bear (Director of Sales and Marketing at South Shore Harbor Resort) at the monthly Clear Lake Area Chamber of Commerce Luncheon

    Waldron & Schneider honors and remembers all those who have served our country on this Memorial Day. ... See MoreSee Less

    Waldron & Schneider honors and remembers all those who have served our country on this Memorial Day.

    Waldron & Schneider was a proud sponsor of the Space Center Rotary Golf Tournament. ... See MoreSee Less

    Waldron & Schneider was a proud sponsor of the Space Center Rotary Golf Tournament.Image attachment
    Load more