Clients often ask whether a non-competition agreement they signed is valid. Employees are often surprised that Florida courts will generally enforce non-compete agreements. (If you signed a non-compete agreement, your employer could sue you if you went to work for a competitor and could even get a court order requiring you to quit your new job.) Check out our FAQs and Cynthia Sass’s video to learn more about non-compete enforceability in Florida.
However, change may be coming. In 2021, President Biden tasked the Federal Trade Commission (FTC) to “curtail the unfair use of non-compete clauses.” To start off the new year, the Federal Trade Commission (finally) released a proposed rule that would ban noncompete agreements in almost all employment contracts throughout the U.S. The proposed rule is not yet law. But, if the rule goes into effect, this would be a huge victory for Florida workers (and companies looking for new hires). Of course, it is unlikely to go into effect without legal challenges.
What is a non-competition agreement?
A non-compete is a written agreement between an employer and an employee that prevents the employee from going to work for a competitor. To be enforceable, a non-compete must protect a legitimate business interest of the employer (such as trade secrets, client relationships, confidential information, goodwill), and be reasonable in the length of time and geographic reach.
Non-compete agreements have become increasingly common in the U.S., although they are partly or completely banned in some states. Many people assume they are restricted to high-level executives. However, many employers impose non-compete agreements on workers at all levels of skill and responsibility.
Why does the FTC want to ban non-compete agreements?
The FTC believes that non-compete agreements harm workers by restricting their freedom, lowering their wages, and worsening their working conditions because a worker who cannot leave their job for a similar position in the same geographic area is less able to bargain for better pay or quality of life.
In addition to harming workers, the FTC argues, non-competition agreements also harm businesses by artificially limiting the pool of available talent and inhibiting the flow of ideas across industries. The FTC believes that this also harms consumers by increasing prices.
The FTC says that employers can protect their legitimate business interests in less restrictive ways than a non-compete agreement, such as non-disclosure agreements.
What does this mean for workers?
If the proposed rule becomes law, employers will no longer impose non-compete agreements on workers, and would have to remove existing non-compete agreements from employment contracts. Employers could not tell workers that they are subject to a non-compete agreement. In fact, the proposed rule would require employers to inform employees that any non-compete obligations are no longer in effect. This would apply to virtually all employees and all employers, and even independent contractors. (It would not apply to a person selling a business or disposing of an ownership interest in a business, etc.)
While this may be good news for workers, for now, the proposed rule is not a law, and non-competition agreements are still valid in Florida (and other jurisdictions where they are enforced). Employees who are asked to sign employment contracts that contain non-compete provisions should carefully review the contract, because there is no guarantee that this proposed rule will survive legal challenges and become law. And, even if the FTC publishes a “final” rule, it is likely to face legal challenges.
The proposed FTC rule banning noncompete agreements is currently in the notice-and-comment stage. Any member of the public can submit comments on the proposed rule at: https://www.regulations.gov/docket/FTC-2023-0007/document. The comments period ends on March 10, 2023.
If you have a non-compete agreement and are thinking about leaving your job, or if you are being asked to sign a non-compete as a condition of employment, we strongly urge you to consult with non-compete lawyers to review these agreements and understand the potential restrictions. Sass Law Firm represents workers in challenging the validity of non-compete agreements as well as defending workers who are sued by their former employers over such agreements.