We have news on two fronts:

First, the FTC Rule

As related to the Federal Trade Commission’s nationwide ban on noncompete agreements, the FTC has appealed the federal court injunction in Texas to the federal Fifth Circuit Court of Appeals in New Orleans. Recall that the FTC issued its nationwide ban, with limited exceptions, on April 23, 2024. That rule was enjoined on a limited basis on July 3, 2024, by a Texas federal district court. The Texas district court later struck down the FTC ban on a nationwide basis on August 20, 2024. Recently, on October 18, 2024, the FTC filed its appeal of that ruling. So, our noncompetes are safe for now as we likely will not have a final decision on the FTC noncompete rule for another year or more.

Second, the NLRB General Counsel Is at It Again

In May of 2023, the GC Jennifer Abruzzo issued a detailed memo describing how noncompete agreements violate the National Labor Relations Act as to workers covered by that act. Her view is that a restriction on the ability to quit or to change jobs quickly chills employees from engaging in union activity. Employees with noncompete agreements, according to her, are less likely to threaten to quit to secure improved working conditions, are less likely to seek employment with employers that have better working conditions, and are less likely to solicit coworkers to quit and go work somewhere else.

She issued a new GC memo on October 7, 2024. This memo addresses the type of relief that the board should seek in the case of an unlawful noncompete agreement. According to the GC, the relief sought should not be limited to invalidating and prohibiting enforcement of an agreement but also should include a remedy for the “pernicious harm” caused by the agreement. Specifically, the relief sought through the charge process should include a “make-whole” remedy. For example, if an employee with a noncompete agreement could have applied for an available job, and the employee was qualified for that job, the board should seek not only the invalidation of the noncompete agreement but also the difference in pay that the employee could have made between the current job and the new one. She also says that, in the case of an employer seeking to enforce an agreement through litigation, the employer should be ordered to dismiss the case and pay the employee’s costs and attorneys’ fees. So, if you have noncompete agreements with your nonmanagerial employees, be aware that the GC wants to make those more costly for you.