ftc Archives - Lake Effect HR & Law

Federal Judge Blocks Nationwide Noncompete Ban

admin — Wed, 21 Aug 2024 14:45:57 +0000

Lake Effect previously blogged about the FTC’s ban on noncompetition agreements. In a game-changing decision for employers, a federal judge in Texas has blocked the FTC’s nationwide ban on noncompetes, which was scheduled to take effect on September 4, 2024. The judge ruled that the FTC lacked substantive rulemaking authority to address unfair methods of competition, and further found the rule to be “unreasonably overbroad without a reasonable explanation.”

On the heels of this decision, employers need not send out employee notices that had been required under the FTC rule. However, employers are well-advised to proceed with a thorough review of current noncompete agreements and related policies. As we recently reported, noncompete agreements remain under threat from other federal and state authorities. As detailed in recent NLRB decisions and General Counsel memoranda, noncompete and nonsolicit provisions aimed at curtailing the rights of non-supervisory employees will be closely scrutinized and potentially nullified under the National Labor Relations Act. In addition, numerous states across the country have completely banned or substantially restricted noncompete agreements, some imposing fines for noncompliance.

Although employers can enjoy a reprieve from the FTC’s nationwide ban, now is not the time to be complacent about the legal status and enforceability of your noncompete and nonsolicit agreements. Reach out to your partners at Lake Effect for assistance in reviewing these important agreements and related policies.

Lake Effect is here to answer all your questions about employment laws, regulations, and new agency guidelines. We continue to monitor important legal and HR developments, as well as other information that could impact the workplace. Please watch our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at info@le-hrlaw.com or 1-844-333-5253. 

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FTC Ban on Noncompetition Agreements Takes Effect

admin — Thu, 08 Aug 2024 00:39:30 +0000

As we previously reported, the Federal Trade Commission (“FTC”) issued its final rule on April 23, 2024, banning noncompetition agreements and related provisions. The rule will take effect on September 4, 2024, 120 days after publication in the Federal Register. As of September 4th, employers who have employees under existing noncompete agreements and related provisions, including nonsolicitation of employees and possibly provisions such as claw backs of training pay or a signing bonus , will be required to provide an explicit notice to those employees that their agreements and policies are no longer enforceable (see the FTC’s model notice here).

There is a narrow exception to the ban for senior executives who have existing agreements. Senior executives are defined as workers who earn more than $151,164 annually and who are in “policy-making positions” i.e., an organization’s president, CEO, or the equivalent, or a personal with final authority to make policy decisions controlling significant aspects of an entity. Noncompetes entered into pursuant to the bona fide sale of business entity are also excluded from the ban. There are also exemptions for certain entities, such as financial institutions and nonprofits.

To prepare for September 4th, Employers should review their existing agreements and policies to determine who will need to receive the required notice. Given pending legal challenges that could still delay or prevent enforcement of the ban, Lake Effect recommends waiting until closer to the deadline to send the notices.

In addition, employers should revise existing agreements and policies to ensure compliance going forward. Of note, employers may keep in place agreements that protect confidentiality and client relationships. However, any existing agreements that blend these permissible provisions with soon-to-be prohibited noncompetition and related provisions will have to be revised. Employers should also be mindful of applicable state laws on the matter which may impose more stringent requirements and/or penalties relating to noncompetition provisions.

As we quickly approach September 4, 2024, Lake Effect can help assess your existing agreements, customize FTC-required notices, and recommend revisions to your agreements or handbook provisions. We will do so consistent with your mission, culture, compensation philosophy, and commitment to your employees.

Lake Effect is here to answer all your questions about employment laws, regulations, and new agency guidelines. We continue to monitor important legal and HR developments, as well as other information that could impact the workplace. Please watch our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at info@le-hrlaw.com or 1-844-333-5253.

The post FTC Ban on Noncompetition Agreements Takes Effect appeared first on Lake Effect HR & Law.

FTC Bans Noncompete Agreements

admin — Thu, 25 Apr 2024 14:59:58 +0000

On April 23, the Federal Trade Commission (“FTC”) issued its final rule banning noncompete clauses in employment agreements. Barring a successful legal challenge (including lawsuits already filed in Texas courts), the rule will take effect 120 days after publication in the Federal Register. At that time, employers who have employees under existing noncompete agreements will be required to notify those employees that their agreements are no longer enforceable (model notice here). One narrow exception is carved out for senior executives who have existing agreements. Senior executives are defined as workers who earn more than $151,164 annually and are in “policy-making positions.” Further, the FTC noncompete ban does not apply to noncompetes entered into by a person pursuant to a bona fide sale of a business entity.

Noncompete agreements have been under recent attack from multiple governing bodies. For example, the NLRB recently issued guidance that noncompete agreements violate employees’ rights under the National Labor Relations Act. Four states have previously banned noncompetes, California, Minnesota, Oklahoma, and North Dakota, each with a different basis for its decision. A dozen other states have implemented restrictions on noncompete agreements, many with rules that subject employers to fines for non-compliance. Notably, the FTC rule specifies that it preempts all state laws that conflict with it, so less restrictive state laws addressing this issue will simply become moot.

We advise that employers act now to evaluate their employment-related agreements. Narrowly drafted trade secret related agreements, nonsolicitation agreements, and nondisclosure (confidentiality) agreements are still allowed under the rule and by the National Labor Relations Board. Lake Effect can help you evaluate your needs and recommend the right employment agreements for your business. We are also watching legal challenges to this final rule and will continue to keep you apprised.

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