Our team has been closely monitoring developments within the Federal Trade Commission (FTC) after the commission proposed a ban on non-compete clauses in employment contracts last January. Now, the FTC has formally voted to approve and implement the rule.
This has far-reaching implications for Miami and Florida businesses that use non-competes to protect their businesses, weed out the competition, and preserve trade secrets. It’s important as a business owner and entrepreneur to understand what the final rule says and how it applies to your organization.
When Will The Ban on Non-Compete Clauses Take Effect?
The timeline for the enforcement of this ban is still somewhat up in the air, largely due to potential (and expected) legal challenges. However, if litigation over the non-compete ban does not arise then it will become effective in September, roughly four months after the vote to approve the rule. Our team will keep you updated on any new developments regarding this rule between now and then.
Ban on Most Current Non-Compete Clauses
The most significant change that business owners in Florida need to prepare for is the expiration of all existing non-compete clauses in employment contracts once the rule is in effect (with limited exemptions that we’ll touch on below). The FTC claims this change will bolster competition, increase wages, and promote a more equitable job market. Even if you explicitly negotiated the non-compete clause into a contract, it will not be enforceable unless it falls within the exceptions.
Ban of Most Future Non-Compete Clauses
Moving forward, the inclusion of non-compete clauses in new employment contracts are not enforceable, even if these clauses are drafted into the contracts. They will not stand up in court if an employee challenges them, significantly altering how businesses negotiate contracts with new hires.
Exemptions to the FTC Ban on Non-Compete Clauses
Despite the broad scope of the ban, there are important exemptions that Florida business owners should note. First of all, non-profit organizations can continue using non-compete agreements as the FTC only governs for-profit entities. Additionally, existing non-compete clauses that involve senior-level executives and those related to the sale of a business remain enforceable. The last exemption is industry-specific with these clauses still permitted in industries including:
- Banking institutions
- Savings and loan institutions
- Federal credit unions
- Air carriers
- Businesses subject to the Packers and Stockyards Act
Protect Your Company With The Law Office of Ray Garcia
As dedicated advocates for Miami and Florida businesses, we at the Law Office of Ray Garcia are committed to helping you navigate these changes. Our goal is to assist you in outperforming the competition through innovative and effective strategies. If any business litigation arises from these recent regulatory changes, our team is ready to support your business. Contact us for help implementing strategies to beat the competition or if you need help should litigation arise.
Law Office of Ray Garcia, P.A.
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