In a word, gone.
As many of you know, the FTC is a federal agency with the authority to make rules to implement various statutes passed by Congress over the years to promote competition, or to control anti-competitive business practices. Viewing non-compete agreements as bad for competition, the FTC took a wide swipe and deemed almost all of them an unfair trade practice incapable of being enforced.
But, with hours to go before the effective date of the FTC’s new rule, a federal court declared that the FTC has acted outside the scope of its authority and the court enjoined the FTC from enforcing it.
Will there be an appeal? Probably. But, for now, and for the foreseeable future, non-compete agreements are not per se unlawful. Instead, like always, their enforceability will depend on the precision with which they are drafted and the details of the restrictions.
The current discussion of a possible new FTC rule is a good reminder of at least two points we always tell our clients:
(1) No, I’m sorry, but there is no such thing as a form non-compete agreement you can download from the internet and rely upon when you really need it; and
(2) Yes, carefully written non-compete agreements are generally lawful, but they might not hold up in every situation, depending on the facts.
A careful business should work with legal counsel to design contracts that fit–for the specific industry, the specific employee’s job duties, the specific territory, and the specific customer base. With proper planning and legal advice, at least some degree of legitimate protections will always be recognized and enforced by courts, regardless of any appeals in the current fight with the FTC or any new, more limited rule-making effort by the agency.