FTC's Non-Compete Rule Blocked And Unlikely To Be Revived – But Risk Remains

Last week a court temporarily enjoined the Federal Trade Commission's rule prohibiting non-compete terms in employee contracts, though the preliminary injunction does not have nationwide effect. While the future prospects of the FTC's rule look grim, there remain risks to using non-compete provisions even if the non-compete rule never goes into effect nationwide, both under some state laws and from potential individual FTC investigations. And for companies with ongoing concern about risk arising from the non-compete rule, our original recommendations still stand: take appropriate precautions now so that you are ready if compliance becomes necessary on short notice.

In April, the FTC issued its broad ban on non-compete terms – provisions in employer-employee agreements prohibiting the employee from working for a competing employer. Almost immediately, Ryan LLC (a tax preparation firm) and the US Chamber of Commerce filed a declaratory judgment action in the