Staying informed about the FTC’s evolving non-compete regulations is challenging yet vital for Connecticut small businesses. We originally wrote about the ruling here, then again here. Now we want to give you the latest on the rulings and how it can impact your business.
FTC’s Proposed Rule
In April 2024, the FTC proposed a rule to prohibit most non-compete agreements starting September 4, 2024. This move is aimed at enhancing worker mobility, increasing wages, and fostering business innovation. The rule includes exceptions for senior executives and legitimate business sales. The FTC anticipates this will boost new business formation by 2.7% annually and increase average worker earnings by $524 per year.
Diverging Court Decisions
- Texas Ruling (July 3, 2024): A preliminary injunction was granted by Judge Ada Brown, halting the FTC’s enforcement of the rule against specific plaintiffs. The court raised questions about the FTC’s authority to impose such a ban.
- Pennsylvania Ruling (July 23, 2024): Conversely, Judge Kelley Brisbon Hodge supported the FTC’s authority to implement the ban, ruling against the plaintiff, ATS Tree Services LLC. This decision underscores a legal divide on the issue.
What Lies Ahead?
The future of the FTC’s non-compete ban is uncertain due to these conflicting rulings. A final decision from the Texas court is expected by August 30, 2024, just before the rule’s scheduled implementation on September 4. Further appeals are anticipated, which may ultimately require resolution by a higher court.
Implications for Shoreline Area Businesses
Local businesses should prepare for possible changes to non-compete agreements, but don’t do anything about them yet. These clauses have traditionally been used to protect business interests, and firms may need to explore alternative methods to safeguard proprietary information and retain key employees.
Stay tuned for more updates, and reach out to our team for personalized guidance on dealing with these regulatory developments.