The Federal Trade Commission (a U.S. government agency) met today and banned non-compete agreements nationwide. The rule goes into effect in 120 days. In the final rule language, executives making at least $151,000 a year can still be bound by an existing non-compete agreement, but they cannot be made to sign new non-compete agreements. For other lower level employees, any existing non-competes would no longer be valid, and the company must notify the employees that they are no longer bound by the non-competes after the effective date. South Carolina employees would fall under the rule’s jurisdiction as well.
The bigger question, though, is how quickly will a federal judge issue a nationwide injunction to place the rule on hold while the courts determine whether this rule that banned non-compete agreements nationwide is valid or not. As I’ve written previously, companies and advocacy groups will be filing lawsuits about as fast as they can, seeking to enjoin the rule. The U.S. Chamber of Commerce has already announced that it plans to file a lawsuit as early as tomorrow. I would expect some sort of request for an emergency hearing for a preliminary injunction, or at the very least, a request for the hearing to be held before the rule formally goes into effect.
Does this mean that South Carolina employees are free to operate as though their non-compete agreement does not exist? No, I wouldn’t advise that. This FTC rule that banned non-competes nationwide doesn’t become effective for at least 120 days. Further, we will need to see how the courts rule on these issues before you take any steps that would run afoul of your non-compete. Again, my best guess is that the FTC’s rule is ultimately shot down and declared unenforceable by the courts, so don’t rely on this ban for making decisions in your career.
Best practice for South Carolina employees is to talk to a South Carolina non-compete lawyer first to see what your legal options are as to the specific non-compete language.
We’ll keep you updated on this issue through our blog.
