The Federal Trade Commission’s ban of most noncompete agreements has the business community on edge with the ruling set to go into effect in 120 days. Hugh Murray, Chair of McCarter’s Labor & Employment Practice spoke with ROI-NJ about the ruling and offered a bit of advice for business owners. “Take a breath,” Hugh said. “The effective date of the rule is 120 days after publication in the federal register, which will happen this week. So, the earliest the rule will take effect will be August.” He continued, “Take another breath. Lawsuits by business groups have been teed up and will be filed today or tomorrow seeking to invalidate the rule on multiple grounds. Those challenging this broad rule have lots of strong arguments and will have carefully selected their forum (probably a specific district court in Texas).”
Hugh notes that the 120 days offers employers time to prepare for a coming change in employment law and said that “Even if the rule is delayed or never implemented, the tide is moving quickly with regard to noncompete agreements at the state level.” He added, “It is more and more difficult for a business to enforce a noncompete for its employees, especially if the employee can simply move to a different state that does not allow such agreements. Businesses that have heavily relied on noncompetes should be rethinking their overall strategy for protecting trade secrets, client relationships and employee retention.”