Federal Judge Blocks FTC’s Non-Compete Ban
A Texas federal judge has permanently blocked the Federal Trade Commission’s (FTC) proposed ban on non-compete agreements in employment contracts. The judge ruled that the FTC exceeded its authority in enacting the ban, finding it to be arbitrary and capricious. This means the FTC’s proposed non-compete ban in employment agreements will not take effect September 4 as originally planned.
The FTC has indicated that it may appeal the decision and has indicated it will continue to fight non-compete agreements, even if on a case-by-case basis.
What Employers Should Know
The Texas court’s ruling means non-compete agreements remain enforceable in employment contracts as long as they are (i) in writing, (ii) part of an employment contract signed before or at the commencement of employment or supported by other legal consideration, (iii) reasonable as to the time and territory of the restriction and (iv) designed to protect a legitimate business and not against public policy.
Although enforceable if properly drafted, under North Carolina law employers need to be conscientious about drafting non-compete agreements that seek to protect actual legitimate business interests and are no broader than necessary to protect those legitimate business interests. Non-competes need to be narrowly tailored and carefully drafted based on existing case law in North Carolina.
Employers should seek advice from an attorney experienced in employment law to review current non-compete agreements for enforceability pursuant to applicable North Carolina law. It is advisable to review and update all restrictive covenants in employment agreements including non-compete restrictions, non-solicitation restrictions and confidentiality and non-disclosure restrictions on a regular basis to ensure continued compliance with rapidly evolving law in this area.
Please do not hesitate to contact our employment attorneys if you have any questions.
