As part of a coalition of business groups, the Association submitted a letter to the FTC urging it to delay its rule banning non-compete agreements, pending the outcome of current legal challenges to the rule.
The FTC issued its final rule banning nearly all non-compete agreements on April 23, and was immediately met with legal challenges from the business community.
Our letter argues “The [rule’s] impending effective date and lack of Commission guidance on key pieces...has created substantial uncertainty for businesses and employees around the country.” It also cites pending litigation and references examples of instances where other rules were delayed pending the outcome of legal challenges as support for formally delaying the FTC rule’s effective date.
There is hope that the FTC heeds the letter and delays the effective date of the rule – it recently delayed a rule regarding car sales for similar reasons, and agencies often delay rules pending the outcome of ongoing litigation. Regardless, the current legal challenges to the rule are expected to succeed in at least a temporary delay, given the FTC’s lack of authority to issue the rule and the judicial district where the cases are being heard – the same district has previously invalidated multiple Biden administration rules.
Only the beginning: Unfortunately, the FTC’s rule and its eventual fate are only one chapter of the ongoing war against non-compete agreements. More and more states are targeting such agreements and there is bipartisan appetite at the federal level to restrict or outright ban them. Employers should not view the FTC’s ban as the end of the story and should continue to evaluate their use of restrictive covenants relative to actual and potential restrictions, even if the FTC rule eventually fails.
