ÀÏÅ£Ó°ÊÓ

Status

On May 14, 2024, ÀÏÅ£Ó°ÊÓjoined a broad group of trade associations in filing anÌýÌýin support of plaintiffs’ request for injunctive relief against the Federal Trade Commission’s final rule to ban noncompete clauses. Injunctive relief is appropriate and necessary to avoid the immediate and irreparable harm the FTC’s final rule would impose on the hundreds of thousands of American businesses—like construction companies—that appropriately rely on narrowly tailored noncompetes.

On April 23, the Federal Trade Commission voted 3-2 to issue itsÌý. The rule goes into effect on Sept. 4. , under the new rule, existing noncompetes for the vast majority of workers will no longer be enforceable after the rule’s effective date. Existing noncompetes for senior executives can remain in force, but employers are banned from entering into or attempting to enforce any new noncompetes, even if they involve senior executives. Employers will be required to provide notice to workers other than senior executives who are bound by an existing noncompete that they will not be enforcing any noncompetes against them. ÀÏÅ£Ó°ÊÓissued aÌýnews releaseÌýopposing the rule.

FTC Resources on the Final Rule:

To learn more about the final rule and what happens next, read ÀÏÅ£Ó°ÊÓgeneral counsel Littler Mendelson’sÌý.

In April 2023, ÀÏÅ£Ó°ÊÓsubmittedÌýcommentsÌýin opposition to the FTC’s unprecedentedÌýÌýto ban noncompetes. ÀÏÅ£Ó°ÊÓalso joined the U.S. Chamber of Commerce and 280 business groups in submittingÌýÌýurging the FTC to rescind the proposed rule.

Desired Outcome

The final rule to ban all noncompete agreements nationwide—except existing noncompetes for senior executives—is a radical departure from hundreds of years of legal precedent. Ultimately, this vastly overbroad rule will invalidate millions of reasonable contracts—including construction project contracts—around the country that are beneficial for both businesses and employees.

ÀÏÅ£Ó°ÊÓmembers have valid business justifications for utilizing noncompete agreements, such as protecting confidential information and intellectual property. This new rule will have a harmful effect on their companies as well as their employees, forcing companies to rework their compensation and talent strategies.