Navigating the Federal Trade Commission’s Proposed Non-Compete Clause Rule: What Florida Employers and Employees Need to Know

The Federal Trade Commission (FTC) has recently taken significant steps toward banning non-compete clauses nationwide, a move that could drastically alter the landscape of employment law, particularly here in Florida. If implemented, the FTC’s proposed rule would prohibit employers from using non-compete agreements with employees, which could impact millions of workers and businesses across the country. Here’s what you need to know about the current status of this rule, the legal challenges it’s facing, and how to prepare for its potential implementation.

The FTC’s Proposed Non-Compete Clause Rule: An Overview

In April 2023, the FTC published a rule that would make it illegal for employers to enter into or enforce non-compete clauses with workers. The rule is part of the FTC’s broader initiative to promote fair competition and reduce barriers to worker mobility. If enacted, the rule would:

• Ban non-compete clauses outright for all employees, regardless of job function or salary.
• Require employers to rescind existing non-compete agreements and notify employees that their agreements are no longer in effect.
• Prohibit employers from attempting to enforce non-compete clauses or suggesting that a worker is bound by one.

Legal Challenges and Current Status

The rule does not go into effect until September 4, 2024. The rule has also faced considerable opposition, particularly from business groups and certain states, leading to several legal challenges. As of now:

• Multiple lawsuits have been filed challenging the FTC’s authority to implement such a sweeping rule. These cases argue that the FTC is overstepping its regulatory powers and that the rule would infringe on states’ rights to govern contracts. In one case, a federal judge in Texas temporarily blocked the enforcement of the rule against a company who filed suit. It is expected that the court in Texas will issue a final decision on August 30, 2024, which may ban enforcement of the rule nationwide. Another judge in Pennsylvania declined to temporarily block enforcement of the rule.
• The rule is not yet in effect. Currently, the rule does not go into effect until September 4, 2024. Given the legal challenges, it is unclear whether that will occur. It is possible that a court will issue a decision blocking the rule, which will lead to lengthy appeals that take time to resolve.

What Employers Should Do Now

Even though it is uncertain that the rule will go into effect, Florida employers should start preparing for the possibility that the FTC’s rule may be implemented, even as it faces legal hurdles. Here are some steps to consider:

1. Review existing non-compete agreements: Employers should conduct an audit of all existing non-compete agreements to identify which employees are currently bound by them.
2. Consider alternative protections: Employers may want to explore other legal mechanisms, such as non-disclosure agreements (NDAs) or non-solicitation clauses, which are not targeted by the FTC’s proposed rule and can offer some protection of business interests.
3. Stay informed: Given the fluid nature of this issue, employers should stay updated on the latest developments and consult with legal counsel regularly to ensure compliance with both current and future regulations.

Recommendations for Employees

Employees in Florida should also be aware of how the proposed rule could impact their rights and career options:

1. Understand your current obligations: If you are currently subject to a non-compete clause, be aware that this rule could potentially void your agreement in the future, but it is still enforceable until the rule is finalized and implemented.
2. Explore new opportunities: The potential invalidation of non-compete clauses could open up new job opportunities, particularly in industries where such agreements are prevalent. However, please note that the non-solicitation and confidentiality clauses in your agreements with your employer are likely to remain enforceable.
3. Seek legal advice: If you are considering a job change or have questions about how the proposed rule might affect your current non-compete agreement, it’s advisable to consult with an employment attorney.

Conclusion

While the FTC’s rule on non-compete clauses is not yet in effect, its potential impact is significant. Both employers and employees in Florida should take proactive steps to prepare for possible changes. Staying informed and seeking legal guidance can help you navigate this evolving area of employment law.

For more information or to discuss how this could impact your specific situation, please reach out to our firm. We’re here to help you understand and prepare for these important changes in employment law.

To assist with these uncertain times, Scott Law Team is offering special reduced rate contract reviews for questions about non-compete agreement. Please contact our office to schedule a review today.