Based on these reasons, the court ultimately concluded that the Final Rule was “an unlawful agency action” requiring it to be set aside with nationwide effect.
The FTC is considering an appeal of the decision. It is also possible that the FTC may seek to stay the court’s decision pending the appeal. Whatever the FTC ultimately decides, it is clear that employers are relieved—at least for the time being—from the obligations originally set to take effect on September 4th.
It is important to remember, however, that no matter how welcome this latest development, non-competes continue to be heavily scrutinized. For example, the FTC emphasized that the court’s decision does not “prevent [it] from addressing non-competes through case-by-case enforcement actions.” The General Counsel of the National Labor Relations Board also takes the position that non-compete agreements violate the National Labor Relations Act, and a number of states have passed or proposed legislation limiting the use of non-competes.
Employers are encouraged to review their use of non-compete agreements, including reviewing which employees are required to sign them and ensuring they are narrowly tailored to meet state law requirements.
*Vincent Farisello is a partner at Carmody Torrance Sandak and Hennessey LLP and co-leader of the firm’s Labor & Employment Group. Maria Laurato is an associate in Carmody’s Labor & Employment Group.
This information is for educational purposes only, to provide general information and a general understanding of the law. It does not constitute legal advice and does not establish any attorney-client relationship.
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