May 9, 2024
Non-Competes: Employee Questions About the FTC’s Ban
This ArentFox Schiff alert notes that employers will likely face questions from employees about the enforceability of existing non-competes restrictions following the FTC’s ban — despite the Chamber’s challenge and a litigation schedule that would allow the Court to issue an order prior to the September 4 effective date. The alert includes sample questions and talking point responses. Here’s an example:
Employee Question: What happens to our existing noncompete agreements? Will the company enforce our noncompete agreements if we leave?
Proposed Response: The FTC’s final rule does not go into effect until 120 days after it is published in the Federal Register. We are aware of multiple court challenges to the FTC’s authority to issue the rule. We are monitoring these challenges. For now, we are not taking any action to rescind or revoke our existing agreements.
The company intends to continue to enforce employee noncompete agreements consistent with established law, unless and until the courts determine that the FTC’s new rule is actually enforceable.
If the FTC’s new rule survives court challenge, existing noncompetes with most employees will be rescinded when the new rule goes into effect. Existing noncompetes with senior executives, however, will continue to be enforceable. Confidentiality covenants, and customer nonsolicitation covenants, and employee nonsolicitation covenants for all of our employees will remain enforceable, even if the FTC rule ever actually takes effect.
In addition to preparing for employee questions, this Morgan Lewis memo suggests companies “take inventory” of noncompete clauses before the effective date to determine which employees may need to receive the required notice.
– Meredith Ervine