FTC Reverses Course On Noncompete Ban

In April of 2024, during President Biden’s term, the Federal Trade Commission (FTC) enacted a rule banning all noncompetition agreements. That rule was quickly challenged in the courts and stayed. The Biden Administration appealed those court decisions, but the current FTC leadership has now sought to dismiss the appeals. On September 5, the FTC also acceded to the vacatur of the rule banning all noncompetes, explaining that the Commission lacked authority to issue the rule.   

This does not mean, however, that the FTC is done with noncompete agreements. The agency remains interested in this area and clearly intends to continue its pursuit of overly broad, unreasonable restrictions. The agency recently “launched a public inquiry to better understand the scope, prevalence, and effects of employer noncompete agreements, as well as to gather information to inform possible future enforcement actions,” stating: “While noncompete agreements can serve valid purposes in some circumstances, available evidence indicates that they are often subject to abuse.”

Employers should continue to focus on carefully following Nevada law on noncompete agreements and crafting reasonable restrictions. In Nevada, hourly employees cannot be subject to noncompete restrictions. For other employees, the restriction must be supported by valuable consideration and narrowly tailored in time and scope. KZA’s attorneys are well versed on noncompete restrictions and can help you determine reasonable parameters for these provisions. 

KZA Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.