We invite you to watch our webinar, "Deciphering the FTC's Non-Compete Ban: Navigating the New Regulatory Terrain and Adequately Protecting Employers' Interests." Our multi-disciplinary team, comprised of Michael Wexler, Robert Milligan, Kate Perrelli, Suzie Saxman, Marc Fosse, and Cary Burke, dissected the ramifications of the new FTC rule banning most non-competes with workers and provided invaluable insights into how it impacts a variety of aspects of many businesses.
Here are the key takeaways from the webinar:
- Labor: The FTC rule is just the latest salvo in President Biden's "whole of government" approach relating to restrictive covenants. For over a year, the NLRB's general counsel has taken the position that restrictive covenants agreements as applied to non-supervisory employees are unlawful. With both the NLRB and FTC cracking down on non-competes, employers may wish to take this opportunity to revisit their practices with respect to restrictive covenants.
- Trade Secrets: As the FTC Rule is the subject of pending legal challenges, it is a good time to review your restrictive covenant agreements, including non-competes, to make sure they comply with state laws. If the Rule becomes effective, other restrictive covenants will become even more important to protect business assets. If the Rule does not become effective, you have the benefit of having audited your agreements for state compliance.
- M&A: While buyers in an M&A transaction will generally be able to benefit from non-competes given by sellers, with the FTC Rule, it will be more difficult to obtain enforceable non-competes from worker/sellers who hold small shares of the target and are not involved in negotiating the terms of the sale. M&A buyers will need to develop alternatives to a "one size fits all" approach to non-competes.
- Employee Benefits: This is a good time to analyze the potential scope of employees who would have non-grandfathered agreements. For example, analyze now which employees in a nonqualified deferred compensation plan with a post termination noncompete and who are part of a top hat group would also be treated as senior executives.
- Compliance: September 4, 2024 is the current scheduled effective date of the FTC Rule. Prudent employers should carefully follow whether the Rule is vacated and the FTC is enjoined from enforcing the Rule. At a minimum, employers should be prepared to send the required notices if there is no injunction prior to the effective date. Employers should compile a list of impacted current and former employees, with relevant contact information and determine whether any of the impacted employees qualify for the "senior executive" and evaluate whether there are "senior executives" who should sign non-competes prior to the rule's effective date. Model notice language is included in the FTC Rule and can be delivered by email or text message, or by delivering a paper notice by hand or mail. The notices must be sent before the effective date of the rule. But for right now employers should carefully monitor the federal action brought in the Northern District of Texas seeking to vacate the Rule and enjoin the FTC from enforcing it.
To view the webinar recording, click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.