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Update On The Ban
The FTC issued a ban, effective as of September 4, invalidating almost all existing noncompete agreements and is banning nearly all future noncompete agreements, with a few noted exceptions that we described in our Client Alert of August 19.
We pointed out that there were a handful of legal challenges to this ban, notably in Florida, Pennsylvania and Texas, and we were expecting decisions in the week prior to September 4. We opined that “it is almost inconceivable that what the FTC has done here is going to be upheld when all is said-and-done. It is a vast overreach of bureaucratic power and arguably unconstitutional on its face.”
Judge Brown in Ryan v. FTC in the Northern District of Texas has now set aside the ban, ruling it will not be enforced and will not take effect on September 4, 2024. Although we fully expect the FTC will appeal this ruling to the Fifth Circuit Court of Appeals, we do not expect this matter to be finally resolved until it eventually makes its way up to the Supreme Court – which could easily take another 12 to 18 months.
What to Do Now?
We will continue to watch for further developments, but at this juncture we are advising clients to not take any action in regard to existing noncompete covenants and not to issue the FTC’s proposed model notice to workers or independent contractors under such covenants.
For more information, feel free to contact us at your convenience.
Berenson LLP serves as counsel to the remodeling and home improvement industry. This Client Alert is intended to provide general information regarding industry legal issues and developments, and it should not be construed as legal advice on any specific facts or situations. For further information on the legal solutions provided by BLLP, please contact us at 703.759.1055 or info@BerensonLLP.com. You can also visit us online at www.BerensonLLP.com or www.HomeImprovementLaw.com. Any tax information contained herein is not intended to be and cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer.
