Employment / 1 min read
The Federal Trade Commission (FTC) is proposing a ban on noncompete agreements. While no one knows exactly what the FTC’s final rule will look like or whether it will only ban the use of noncompetes for rank-in-file employees, any final rule issued by the FTC will likely be challenged in the courts. The new rule could be issued as soon as April, but will most likely be issued by the end of 2024.
If the rule is issued and assigned a compliance date, employers would then be prohibited from entering into non-compete clauses with workers and required to rescind any existing noncompete clauses immediately. The proposed rule would exempt certain non-compete clauses between the seller and buyer of a business from coverage under the Rule.
The FTC has invited comments on the proposed rule and has received over 21,000 responses to date.
For now, however, noncompetes are still enforceable in Texas. If some or all noncompetes are banned in the employment context, employers will still be able to use nondisclosure agreements to protect company goodwill and confidential information. Further, employers will still be able to use client and employee non-solicitation agreements as long as the non-solicitation agreement is not so broad that it could function as a noncompete in substance.