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                                                                                                                                                                                  competition agreements by rescinding them. Employers do, however, need to notify their workers that the employ- er will not enforce non-competition agreements in the future. The FTC has included in its final rule model lan- guage for informing employees of this change, which can be communicated through email, text, or in paper format.
The final rule does not generally impact non-disclosure agreements or non-solicitation agreements unless they prohibit a worker from seeking or accepting work or oper- ating a business. Employers should be aware that more restrictive state laws governing non-competition agree- ments remain in effect.
Challenges to Final Rule Looming
As of the announcement of the FTC’s final rule, chal- lenges are already looming. The U.S. Chamber of Com- merce has already vowed to block the rule, calling it “an unlawful power grab” and arguing that the authority to govern non-competition agreements should be left to the states.
The statement issued by the Chamber of Commerce goes on to note that, “since its inception over 100 years ago, the FTC has never been granted the constitutional and statutory authority to write its own competition rules. Non-compete agreements are either upheld or dismissed under well-established state laws governing their use.”
This announcement by the U.S. Chamber of Com- merce will undoubtedly lead to other challenges through the court system. Indeed, a Dallas-based global tax-servic- es and software provider has already filed suit against the Federal Trade Commission over the impact of the final rule.
The FTC, as the Chamber of Commerce rightly points out, has no authority to write its own competition rules. The FTC can, however, make rules if it goes through the proper rule-making process, including introducing pro-
posed legislation and leaving it open to comment for a certain amount of time, which did occur here.
However, even following this process does not ensure that the rule will stand. The rule still remains open to court challenges from the Chamber of Commerce, indi- viduals, or organizations affected by the rule or any other stakeholders within the final rule. This could mean that changes would be on the horizon for the rule, and possi- bly a narrowing of its already expansive application.
Takeaways
As noted, the FTC’s final rule is already being chal- lenged through the court system, and a challenge from the Chamber of Commerce will most likely follow suit. Therefore, if an employer has existing non-competition agreements, the employer may not need to rescind them just yet.
Further, if employers are intending to enter into non- competition agreements that are reasonable and enforce- able under existing state laws, other options, such as non- disclosure agreements and non-solicitation agreements, may have to be used, but it would be prudent to wait on further ruling from the existing challenges to the final rule.
In the meantime, consultation with an attorney will aid in navigating the changing landscape of non-competition agreements. BW
Trevor Brice is an attorney who specializes in labor and employment-law matters at the Royal Law Firm LLP, a woman-owned, women-managed corporate law firm certified as a women’s business enterprise with the Massachusetts Supplier Diversity Office, the National Assoc. of Minority and Women Owned Law Firms, and the Women’s Business Enterprise National Council.
“If an employer has existing non-competition agreements, the employer may not need to rescind them just yet.”
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