The Federal Trade Commission (FTC) took steps last year to ban non-compete agreements. They essentially stated that they believed these agreements were holding workers back in terms of mobility and wages. The FTC said that the vast majority of non-compete agreements would not be upheld and could no longer be used. Non-competes had traditionally been used to restrict which competitors former employees could work for or how quickly they could do so.
That said, some members of the FTC disagreed with this decision even when it was originally made. They dissented, claiming that the Federal Trade Commission did not actually have the statutory authority to make the rule in the first place. Even if they agreed with the goal of the rule, they didn’t think it would stand from a legal perspective.
The rule has now been vacated
The case then went to the district court. The court agreed that the FTC did not have the proper authority.
At first, it appeared that the FTC was going to appeal this decision. However, as the case moved forward, they decided to drop the appeal. They have vacated the rule, meaning that companies can once again use non-compete agreements in their employment contracts.
These agreements still have to be drafted correctly, as there are ways that a non-compete could be used improperly that could still make it illegal. The FTC will look at these issues on a case-by-case basis. But the blanket ban has been lifted. It is important for employers to understand exactly what legal rights and options they have when drafting employment contracts moving forward.
