FTC’s Nationwide Ban On Non-competes

John is joined by Kimberly Carson, Partner in Quinn Emanuel’s New York Office.  They discuss the FTC’s recent rule banning contractual noncompete provisions in employment agreements nationwide.  Kimberly explains that the new rule bans employers from enforcing existing noncompete provisions, entering new noncompete provisions, and representing that workers are subject to noncompete provisions.  She also explains the exceptions to the new rule for existing noncompete provisions with senior executives who have final authority to make significant policy decisions, non-competes connected to the bona fide sale of a business, claims that have already accrued, and good faith mistakes about the applicability of the new rule.  John and Kimberly also discuss the lawsuits that have been filed challenging the FTC’s new rule contending that the ban exceeds the FTC’s statutory authority, is impermissibly retroactive, and is supported by limited evidence and a flawed cost/benefit analysis.  The court hearing these challenges has indicated it intends to rule on a preliminary injunction motion on July 3, 2024, before the rule would go into effect on September 3, 2024.  Finally, they discuss some other avenues, other than non-competes, that companies have to protect their goodwill, trade secrets and investments including trade secret litigation, fixed duration contracts, provisions requiring employees to repay bonuses if they leave a company within a certain time, and “garden leave” provisions under which employees stay on the company payroll and are still subject to contractual and fiduciary duties for a time period after they are fired or resign.