On April 23, 2024, the Federal Trade Commission (FTC) made a defining decision regarding non-compete clauses, marking a momentous shift in labor market regulations. This unprecedent decision aims to eliminate the widespread use of non-compete clauses in employment agreements effective September 4, 2024. Even with the FTC’s decision, there is still uncertainty how individual states, including Florida, will apply the FTC decision.

Non-compete clauses have been a staple in employment contracts across various industries for many years. These clauses were created to prevent employees from working for competitors and/or starting their own competing business following the cessation of employment. The restrictions contained within non-compete clauses could include restrictions such as a timeframe in which the clause remained effective, the geographical area in which the employee could not operate, and a limitation on the scope of work in the competitive field.

Prior to the September 4, 2024 effective date, employers must inform all employees who are subject to a non-compete clause of the FTC’s decision. Such notice by employers must be hand delivered to the employee, mailed to the employee’s last known personal street address, text messaged at a telephone number belonging to the employee, or email at an email address belonging to the employee within forty-five (45) days of the September 4, 2024 rescission effective date. The FTC has drafted sample notices which may be delivered to an employee to meet the notice requirement and have made the samples available on the FTC’s website in various languages(1).

The only employees whose non-compete clauses will remain in effect are clauses involving a senior executive. The FTC has defined senior executives under a two factor test. First, the employee must earn more than a yearly salary of $151,164. In addition to meeting the compensation threshold, the employee’s position must be a “policy-making position.” The FTC lists a position that is a policy-making position as at the level of a president, chief executive officer or the equivalent, officer, or in a position that has similar authority to a president or officer.

The FTC’s decision has created significant uncertainty Non-competes clauses have been utilized by employers for many years. During that time, countless lawsuits have been filed as to the enforceability of the clauses. That means there are countless on-going lawsuits throughout the entire country in which the enforceability of non-compete clauses is at issue. With the FTC’s decision, will that now render on-going litigation moot? Furthermore, will the recent FTC decision lead to an uptick of lawsuits prior to September 4th to ensure that the non-compete clauses remain in effect?

Additionally, there are concerns about the transition period, as companies and workers adjust to the new regulatory landscape. The situation is particularly nuanced in Florida, where non-compete clauses have been historically favored. Florida law, under Section 542.335 of the Florida Statutes, allows non-compete clauses if they are reasonable in time, area, and line of business. This state law has supported the enforcement of non-compete clauses, creating a conflict with the FTC’s federal ban. How Florida will reconcile its state statutes with the new federal mandate remains to be seen. Historically, state statutes have had to yield in the face of a competing, contradictory federal statute based upon the Supremacy Clause of the United States Constitution.

In conclusion, the FTC’s decision to ban non-compete clauses marks a pivotal moment in labor market regulation. The full impact of this decision, particularly in states like Florida, will unfold in the coming months and years.

(1)The link to the samples is https://www.ftc.gov/legal-library/browse/rules/noncompete-rule