FTC’s Proposed Rule that would Ban Non-Compete Agreements is Barred

Blethen Berens has previously provided you information on the Federal Trade Commission’s (FTC) proposed rule that would invalidate almost all non-compete agreements or clauses used by employers as well as any other restrictive agreements that “function” as non-compete agreements. This proposed rule was set to become effective on September 4, 2024, but was subject to legal challenges.

On Monday, August 20th, a Texas Federal District Court Judge issued a ruling barring the FTC rule from taking effect. As a result, at this time, the proposed rule will not take effect on September 4th, and agreements that would have become automatically invalid remain valid and can still be an option for businesses to enter into with their employees.

The proposed rule would have not only invalidated non-compete agreements going forward, it had retroactive application as well and a requirement that employers notify their current and former employees that their non-compete agreement was no longer valid. With this ruling, that notice will no longer be required at this time.

The FTC is considering an appeal of this ruling, so this may not be the end of the story on this proposed rule, but at this time, it will not take effect on September 4th.

Please note, however, that in Minnesota, for agreements entered on or after July 1, 2023, noncompete provisions are no longer allowed, except in specific circumstances. This ruling does not affect Minnesota law on this issue.

We will continue to monitor developments regarding this proposed rule and provide updates. If you have any questions about the impact of this decision or questions about Minnesota law on this subject, reach out to one of the employment law attorneys at Blethen Berens.