The Federal Trade Commission just announced that it will meet next week for the FTC to vote on the rule that would ban non-compete agreements across the country for any employees or independent contractors. Back in October, I discussed the proposed FTC rule, and just last month blogged about how the FTC would likely issue the rule in April 2024. And now, here we are, on the verge of that decision finally being issued.
What Will the FTC Be Voting On?
On April 23, the FTC will first vote on whether to authorize public disclosure of the proposed final rule, and if they vote yes, then the FTC will present the rule to all those watching. Then the FTC will vote on whether to formally issue the rule without further comments.
Remember that under the proposed FTC rule, employers would be prohibited from imposing non-compete agreements on their employees. Further, the rule would make it illegal for a company to even try to have an employee sign a non-compete. For those employees who have already signed non-competes, the company must officially rescind those non-competes within 180 days of the rule being issued. The rule doesn’t discuss non-solicitation agreements, so those would remain unaffected, but other employment restrictions, such as nondisclosure agreements, could fall under the rule if they are written so broadly as to effectively function as a non-compete.
What Happens Next?
So what happens once the FTC issues the rule? Well, I suspect that most likely, many, many lawsuits will be filed by companies immediately, seeking to block enforcement of the rule until a higher court determines whether the FTC has exceeded its authority in issuing the rule in the first place. If a judge issues an nationwide injunction, preventing enforcement of the rule, then those lawsuits will continue through the litigation process and then the appeals process. If the FTC doesn’t back down, then ultimately it’s likely that the U.S. Supreme Court will be called upon to rule upon the validity of the rule.
Takeaways for South Carolina Employees under Proposed FTC Rule
For South Carolina employees, once the proposed FTC rule is blocked, that means that your non-compete–assuming it meets all the requirements of an enforceable non-compete under South Carolina law–would remain in effect, and you’ll need to keep that in mind as you seek other employment. Not all non-competes are enforceable, and some are complete garbage, but if you have questions about the enforceability of your non-compete agreement, you can contact our office to schedule a consult.
I’ll also provide an update on this proposed FTC rule as it moves through the courts.
