Following our Client Alert notifying you of the Federal Trade Commission’s (“FTC”) sweeping ban on non-competes, a Texas federal judge has struck down the FTC Rule that would have invalidated existing, and banned the adoption of new, non-compete clauses. On August 20, 2024, U.S. District Judge Ada Brown issued a national injunction prohibiting the implementation of the FTC Rule, concluding that the commission overstepped its authority to regulate unfair methods of competition, and that the Final Rule was arbitrary and capricious.
While the FTC has suggested it will appeal the decision, for now, agreements containing non-compete clauses remain enforceable, provided they comply with applicable federal and state law.
What is current state law?
In Maryland, non-competes are invalid for those employees who make 150 percent of minimum wage or less. Currently, the state minimum wage is $15.00, so the compensation threshold for non-compete clauses is $22.50 an hour or $46,800 annually. Recent state legislation also adds restrictions on non-compete covenants for certain licensed health and veterinary professionals (see our 2024 Legislative Update for additional information).
What’s next for business owners?
Employers should connect with their legal counsel to better assess the validity of agreements containing non-compete provisions. In addition, business owners should take this opportunity to work with their attorneys to develop strategies to prevent employees from soliciting company customers and to otherwise protect their intellectual property.
Our attorneys will continue to monitor pending legal challenges to the enforceability of the FTC Rule and send Client Alerts as needed. For more information, please contact the Davis, Agnor, Rapaport & Skalny attorney with whom you typically work, or an attorney in our Business Planning & Transactions Practice Group.
