Not long ago, we told readers that the Federal Trade Commission (FTC) issued a final rule that was scheduled to take effect later this year. It would go a long way toward prohibiting employers throughout the country from requiring employees to sign non-compete agreements (or agreements that contained non-compete clauses).
Laws limiting non-competes have already been enacted around the country. The FTC’s plan would bring some consistency to these laws and help prevent them from being used to unnecessarily limit people’s ability to get work in their profession or start their own business after leaving a job. The federal agency has estimated that some 30 million Americans have a non-compete clause in their employment agreement.
Under current Kentucky law, there’s no full ban on non-compete agreements. However, health care services agencies are prohibited from holding people who work as temporary care providers to such agreements.
How does the overturn of the Chevron doctrine change things?
Toward the end of its most recent term, a U.S. Supreme Court ruling overturned something known as the “Chevron doctrine” or sometimes as the “Chevron deference.” That doctrine, which had been in effect for decades, allowed federal agencies to interpret the law if there was a question about it.
The high court’s ruling takes that authority away from federal agencies and gives it to the courts. That ruling could nullify the new rule on non-competes.
A federal court’s injunction
Soon after the high court ruling, a federal judge issued a preliminary injunction against enforcement of the FTC rule in a case involving non-compete agreements used by a company. The judge reiterated the Supreme Court’s finding that the FTC lacked the authority to ban the agreements.
As an employer, it can feel like the law around non-compete clauses and agreements is a moving target. It’s always crucial to know the current law and to consider the reasonableness of any non-compete requirement you establish for employees. Having experienced legal guidance as you draft all of your employment agreements and if you have to defend them in court is crucial to protecting your rights and your business.