Status of Challenge to FTC Non-Compete Ban

As previously reported, there were two lawsuits filed to challenge the Federal Trade Commission non-compete ban. Those cases are now essentially consolidated in the US District Court for the Northern District of Texas. The court recently issued an order setting a briefing schedule on the Motion to Stay the Effective Date and Preliminary Injunction (this motion seeks to stay the Final Non-Compete Rule until the litigation is resolved). 

According to the plaintiff’s motion, there are several reasons that the court should stay the effective date and issue a preliminary injunction, including (1) unrecoverable costs associated with the time and attention needed to review all existing non-compete agreements and notify existing and former employees that they are no longer bound; (2) unrecoverable costs associated with the risk of loss of employees, client relationships, and confidential information; and (3) the need, if the rule is later found to be unenforceable, for employers to decide whether to enforce non-compete agreements against employees who left the employer for a competitor in the belief that the non-compete agreement was invalid (thus, forcing the employee to leave their new job).

According to the court’s order, a decision on that motion will be made by July 3, 2024.

A Closer Look at the FTC’s Final Non-Compete Rule

On April 23, 2024, the Federal Trade Commission (FTC) issued its Final Non-Compete Agreement Rule (Final Rule), banning non-compete agreements between employers and their workers. The Final Rule will go into effect 120 days after being published in the Federal Register. This Final Rule will impact most US businesses, specifically those that utilize non-compete agreements to protect their trade secrets, confidential business information, goodwill, and other important intangible assets.

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Lavigne Quoted in TechTarget Article on FTC Noncompete Ban

Joe Lavigne, a partner in Jones Walker LLP’s Labor & Employment Practice Group and founding member of Jones Walker’s Trade Secret Insider blog, was quoted in the TechTarget article “Election might decide fate of FTC noncompetes ban” on April 26, 2024. In the article, Joe discusses how the Federal Trade Commission’s ban on noncompete agreements affects employers and how any changes to this rule could make operations more challenging for business if reversed following the 2024 presidential election. The rule is expected to take effect 120 days after being published in the Federal Register.

Click here to read the full article.

FTC Votes to Ban Noncompete Agreements

The Federal Trade Commission voted 3-2 today to ban noncompete agreements between employers and employees. A full analysis of the final rule will be forthcoming, but key takeaways are:

  • Final rule becomes effective 120 days after it is published in the Federal Register.
  • All noncompete agreements between employers and “workers,” whether entered into before or after the effective date, will be invalid, unenforceable, and unlawful.
  • Noncompete agreements with “Senior Executives” entered into before the effective date are not invalid, unenforceable, or unlawful.  “Senior Executives” is defined as someone making more than $151,164 annually and who are in a “policy making position.”
  • Does not appear to affect noncompete agreements in the sale of a business context.
  • The final rule will almost certainly be challenged and its enforcement during the pendency of that challenge is uncertain.

    We look forward to bringing you more information about this groundbreaking final rule in the coming days.  If you have questions on how this rule affects you or your business, please reach out to a member of the Jones Walker trade secrets, unfair competition, and noncompetes team.

    The LA Senate Passes Restrictions on Non-Competes for Primary Care Physicians; SB 165 Now Moves to the House of Representative for a Vote

    Last month, we wrote about the anticipated impact of the Federal Trade Commission’s expected rule on the healthcare industry. In that post, we discussed the impacts many argued non-competes would have on the healthcare space. Specifically, while some physician groups argue the prevalence of non-competes in the healthcare industry contributes to physician shortages, other industry groups that represent rural hospitals argue they are necessary to protect the investment those small communities make in desperately needed new physicians. On April 8, 2024, the Louisiana Senate unanimously passed SB 165, a piece of legislation that seemingly takes both of these conflicting concerns into account.

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    The Expected Impact of the FTC’s Expected Rule on Healthcare Industry

    The Proposed Rule

    Last year, the Federal Trade Commission (FTC) issued a proposed rule to ban most noncompete agreements nationwide. With very limited exceptions, the sweeping rule forbids any contractual term between an employer and a worker that has the effect of preventing the worker from accepting employment with a competitor, or operating a competitive business, after the conclusion of the worker’s employment with the employer. The proposed rule also includes an expansive definition of “worker” — including employees, independent contractors, interns, and even volunteers — and includes no exception for executive or highly compensated employees. The comment period for the rules ended April 29, 2023, and the FTC is expected to issue its final rule — which may or may not be as expansive as the proposed rule — in April 2024.

    The Healthcare Industry’s Impact on the Proposed Rule

    The FTC focused on healthcare and physicians when drafting its proposed rule, reportedly looking to a 2017 paper published in Management Science titled “Screening Spinouts,” which evaluated the economic effects of noncompete agreements in the healthcare industry. And according to FTC Chairperson Lina Khan, the healthcare industry has given more feedback on the proposed rule than any other sector. Of note, the American Hospital Association (AHA) has criticized the FTC’s proposed rule, highlighting the negative impact it will have on retention in for-profit hospitals, while the American Medical Association (AMA), the country’s largest physician professional organization, has adopted an official position in support of the rule.

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    Jones Walker Trade Secrets Team Adds Mediation Capabilities

    Jones Walker’s trade secrets, unfair competition, and non-competes team has launched its mediation services backed by years of litigation in this field and with a full understanding of the contentious nature of these disputes.

    Managed properly, alternative dispute resolution (ADR) methods such as mediation can be a more efficient and cost-effective method of dispute resolution than litigation. ADR offers speed of resolution, lower expense, and greater subject matter experience than is found in overburdened court systems.

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    Mediate Early and Sometimes Often

    Closeup of male hand signing legal or insurance document on black desk with reflection.

    Trade secret, breach of fiduciary duty, unfair trade practices, breach of restrictive covenants and retention agreements, and the many state and federal claims that come with departing employees or groups of employees often scream out for mediation. As our blog has demonstrated time and again, aggressive, and immediate action is necessary in these situations and typically once the gauntlet is thrown down, settlement is difficult. Nonetheless, this is exactly why early consideration of how to develop a business solution at the outset is so important.  

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    Effects of FTC’s Proposed Changes on Mergers and Acquisitions

    The Federal Trade Commission (FTC) is proposing changes to the Hart-Scott-Rodino, or HSR, filing rules for mergers and acquisitions.

    Brett Beter, a partner in the Corporate Practice Group was recently interviewed by the Greater Baton Rouge Business Report about the FTC’s proposed rule changes to merger and acquisition rules.

    Read more about this proposed change and the implications on certain mergers and acquisitions.

    Louisiana OMV Data Breach – How Should You Respond?

    On Thursday, June 15, the Louisiana Office of Motor Vehicles (OMV) experienced a data security breach resulting in the loss of the personal information of potentially millions of Louisianans due to a global cyberattack involving the exploitation by hackers of a vulnerability in MOVEit Transfer, an electronic file transfer tool developed by Progress Software. In a press release, the OMV announced that it suspects the personal data of all individuals who possess a Louisiana state-issued driver’s license, ID, or car registration may have been exposed to the criminal cyber attackers, a ransomware gang known as “Clop.”

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