The FTC Non-Compete Ban: What Florida Business Owners Need to Know Now (December 2024 Update)
Updated: December 9, 2024
The Federal Trade Commission’s (FTC) attempt to ban most non-compete agreements nationwide has entered a critical phase of legal uncertainty. As of December 9, 2024, the rule’s implementation remains blocked by federal court challenges, leaving Florida businesses navigating between existing state laws and potential federal changes.
What Does This Mean for Florida Businesses?
As of December 9, 2024, your existing non-compete agreements are still enforceable in Florida. Why? A federal court in Texas has blocked the FTC’s ban nationwide. But don’t get too comfortable – this is a rapidly evolving situation that every Florida business owner needs to watch closely. Ryan LLC v. Federal Trade Commission, 3:24-cv-00986, (N.D. Tex.) Date Filed: April 23, 2024.
What is the FTC’s Non-Compete Clause Rule?
The FTC announced its final rule in April 2024, targeting the elimination of most non-compete agreements, which it labeled as an “unfair method of competition” under the FTC Act. If fully implemented, the rule would prohibit businesses from using non-compete clauses for nearly all workers, including employees, contractors, and other service providers. The final rule is 570 pages long, so keep in mind that what follows is not a comprehensive overview. Until then, here are some limited takeaways on how the new rule impacts Florida business owners.
Who is Affected by the Rule?
The FTC estimates the rule would apply to approximately 30 million workers, impacting almost every industry. Key provisions include:
- Broad Ban: The rule would invalidate nearly all non-compete agreements.
- Targeted Workarounds: Restrictions extend to non-disclosure and non-solicitation agreements designed to function like non-competes.
Exemptions to the Rule
The FTC’s rule included narrow exceptions:
- Non-compete clauses tied to the sale of a business.
- Pre-existing agreements with senior executives earning more than $151,164 annually.
- Agreements breached before the rule’s effective date.
What Do I Need to do if the Final Rule is Upheld?
If the Rule goes into effect, businesses will need to send a notice to their employees regarding the non-enforceability of any non-compete agreement. A sample notice provided by the FTC is available below.
A new rule enforced by the Federal Trade Commission makes it unlawful for us to enforce a non-compete clause. As of [DATE EMPLOYER CHOOSES BUT NO LATER THAN EFFECTIVE DATE OF THE FINAL RULE]. [EMPLOYER NAME] will not enforce any non-compete clause against you. This means that as of [DATE EMPLOYER CHOOSES BUT NO LATER THAN EFFECTIVE DATE OF THE FINAL RULE.]
You may seek or accept a job with any company or any person – even if they compete with [EMPLOYER NAME].
You may run your own business – even if it competes with [EMPLOYER NAME].
You may compete with [EMPLOYER NAME] following your employment with [EMPLOYER NAME].
The FTC’s new rule does not affect any other terms or conditions of your employment. For more information about the rule, visit ftc.gov/noncompetes. Complete and accurate translations of the notice in certain languages other than English, including Spanish, Chinese, Arabic, Vietnamese, Tagalog, and Korean, are available at ftc.gov/noncompetes.
What Exemptions Exist Under the FTC’s New Rule Banning Non Compete Agreements?
Despite the ruling’s broad scope, the FTC has allowed for a few exceptions:
- Non compete agreements used by nonprofit organizations, as they fall outside of the FTC’s authority.
- Non compete agreements that are entered into as a part of buying or selling a business.
- Enforcement on non compete agreements that were violated prior to the ruling’s effective date (120 days after it is published in the Federal Register.)
- Existing non compete agreements for senior executives can remain in place. However, new non compete agreements won’t be allowed even for senior executives.
- The FTC defines senior executives as individuals who:
- received at least $151,164 in compensation during the previous year, and
- make policy decisions for the company “that control significant aspects of a business entity or a common enterprise” (Final Rule, § 910.1)
What Does This Mean for Existing Florida Non Compete Laws?
You may already know that Florida has its own restrictions in place for non competes. However, the FTC’s new rule will take precedence over state law, but it won’t nullify any additional laws that the State has enacted. In other words, the State of Florida can’t pass any laws to ignore the rule, but it can pass laws that would supplement it.
How Does This Affect Florida’s Non-Compete Laws?
Florida has robust state laws governing non-compete agreements. While the FTC’s rule would take precedence, it would not nullify Florida’s ability to enforce additional worker protections. This means Florida could pass supplementary laws that align with, but do not contradict, the FTC rule.
This blog post is for informational purposes only and does not constitute legal advice. To understand how these changes may impact your specific situation, contact FL Patel Law PLLC today.
Stay tuned to our blog for future updates on this critical topic.
FL Patel Law PLLC
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