Understanding the New FTC Ruling on Florida Noncompete Agreements

By: John M. Jorgensen, Esq.

The Federal Trade Commission (FTC) recently voted 3-2 to ban noncompete agreements nationwide. It is estimated that 18 percent of the American workforce is subject to noncompete agreements. In Florida, noncompete agreements have long been authorized by state statute and have been the bane of countless employees who want to leave their current employment but cannot because of a noncompete that they signed as a condition of employment. This has resulted in many employees remaining in jobs where they are paid less or in jobs with management that they detest.

Impact of Noncompete Agreements in Florida

Florida Noncompete Agreement Laws

Under current Florida law, for a noncompete to be enforceable, the employer must prove the existence of one or more legitimate business interests justifying the noncompete which under the language of the statute is not a difficult standard to meet. The noncompete must also be reasonable in duration and geographically. They are enforceable by both temporary and permanent injunctions so employees who are subject to a noncompete can be immediately enjoined from continuing their new employment. Noncompete agreements are in restraint of trade but Florida and many other states have exempted noncompete agreements from laws that prohibit trade restraints.

Details of the FTC’s New Ruling

Scope of the FTC Noncompete Ruling

The new law is to go into effect 120 days after it is published in the Federal Register. It would apply to all noncompete agreements, even existing ones, with an exception carved out for noncompete agreements signed by senior executives. However, it is certain that the FTC’s ruling will be challenged in court as there is a question whether the FTC has the explicit authority to ban noncompete agreements. The U.S. Chamber of Commerce has already come out against it, as will other powerful business groups who believe noncompete agreements are critical to protect proprietary and intellectual information. However, even if the ban on noncompete agreements becomes law, such information can still be protected by nondisclosure agreements typically referred to as NDA’s.

Legal Challenges and Implications

Potential Legal Challenges

For those employees chafing under noncompete agreements they had to sign before accepting employment, there is potentially a way to get out from under them in the future. However, the issue will have to be played out in the courts and the FTC ruling is also subject to the winds of political change during this presidential election year.