Post-Mortem On The FTC's Blocked Non-Compete Rule

In August 2024, a Texas federal court struck down a broad Federal Trade Commission (FTC) rule that would have banned the vast majority of employee non-competition agreements. While this means that employers do not need to contend with a ban on their ability to impose non-competes, they are back to reckoning with a legal landscape featuring a patchwork of varied and nuanced state laws.

For startup founders—particularly those with largely remote workforces—the complexity of complying with such a landscape raises a key question: is it worth it? While non-competes can be a valuable tool for protecting a growing company's confidential information and goodwill (and are often favored by prospective investors and business partners), the significant variance among state non-compete laws (some of which include penalties for issuing non-compliant non-competes) and the oft-disputed question about which state's law applies to a given employee or agreement can make the decision