As part of its ongoing enforcement efforts against allegedly deceptive and misleading uses of artificial intelligence, the Federal Trade Commission (FTC) disclosed five new enforcement actions on September 25, 2024, against companies across various industries that either allegedly made fraudulent claims about their AI resources or offered AI services that could be used in misleading or deceptive ways. Businesses should expect that the FTC will continue to focus its efforts on preventing potentially deceptive, fraudulent or anti-competitive uses of AI under its Operation AI Comply enforcement focus. Read the full Alert on the Duane Morris website.
FTC’s Noncompete Ban Halted by Federal Court
On August 20, 2024, the United States District Court for the Northern District of Texas, in the Ryan lawsuit, struck down a final Federal Trade Commission (FTC) rule―which was set to go into effect on September 4, 2024, and ban noncompetition agreements for virtually all U.S. workers―holding that the rule shall not be enforced by the FTC or take effect as to any workers or employers.
Read the full Alert on the Duane Morris LLP website.
What Steps Employers Should Consider as FTC Noncompete Ban Effective Date Nears – and Legal Challenges Fail to Halt It
As reported in prior Alerts (on January 6, 2023; April 19 and 23, 2024; and July 3 and 24, 2024), after initially proposing the rule in January 2023, in April 2024 the Federal Trade Commission (FTC) voted 3-2 to approve a final rule:
- Banning noncompete agreements with virtually all workers 120 days after publication in the Federal Register (i.e., on September 4, 2024);
- Invalidating existing noncompetes with all workers except senior executives; and
- Requiring employers to send a clear and conspicuous notice to affected workers, by the effective date, that the worker’s noncompete clause will not and cannot be legally enforced.
Legal challenges to the noncompete ban have, thus far, been unsuccessful in securing an order enjoining, staying and/or invalidating the noncompete ban for all employers.
Read the full Alert on the Duane Morris LLP website.
Pennsylvania Fair Contracting for Health Care Practitioners Act Limits Post-Employment Noncompetes
On July 17, 2024, Pennsylvania Governor Josh Shapiro signed into law the Fair Contracting for Health Care Practitioners Act. The Act, which will go into effect on January 1, 2025, will limit the use of noncompete covenants for healthcare practitioners in the commonwealth and require employers to provide notice to patients of a healthcare practitioner’s departure.
According to the Pennsylvania Legislature, the Act is intended to limit what it views as the negative impacts of noncompetition provisions in the employment of covered healthcare practitioners and improve the attraction and retention of those healthcare practitioners in Pennsylvania.
Read the full Alert on the Duane Morris LLP website.
Rhode Island Governor Vetoes Bill Banning Noncompetition Clauses
On June 26, 2024, Governor Daniel McKee vetoed and returned to the state Senate a bill to amend the Rhode Island Noncompetition Agreement Act (Senate Bill 2024-S 2436A/2024-H 8059A). As reported in our prior Alert, if signed into law, the bill would have banned and voided existing and future post-employment noncompetition and customer nonsolicitation covenants with essentially all employees.
Read the full Alert on the Duane Morris LLP website.
Pennsylvania Federal Court Denies Injunction to Halt FTC’s Ban on Noncompetes
As reported in our prior Alert, on April 23, 2024, the Federal Trade Commission (FTC) voted 3-2 to approve a final rule:
- Banning noncompete agreements with virtually all workers 120 days after publication in the Federal Register (i.e., on September 4, 2024);
- Invalidating existing noncompetes with all workers except senior executives; and
- Requiring employers to send a clear and conspicuous notice to affected workers, by the effective date, that the worker’s noncompete clause will not be, and cannot legally be, enforced.
At least three challenges to the noncompete ban have been filed in federal courts since that time, but none have yet succeeded in halting the ban nationwide. As reported in our recent Alert, on July 3, 2024, in the Ryan lawsuit, the U.S. District Court for the Northern District of Texas enjoined the FTC from enforcing its noncompete ban and stayed the ban as to the parties to that lawsuit, but refused to issue a nationwide injunction or stay that would apply to other employers. On the heels of the decision in Ryan, on July 23, 2024, the U.S. District Court for the Eastern District of Pennsylvania, in ATS Tree Services, LLC v. Federal Trade Commission, et al., denied the plaintiff’s motion seeking a nationwide injunction and stay, dealing a further blow to efforts to halt the noncompete ban.
Read the full Alert on the Duane Morris LLP website.
FTC Enjoined from Enforcing Ban on Noncompetes, but Texas Federal Court Refuses to Issue Nationwide Injunction
As reported in our prior Alert, on April 23, 2024, the Federal Trade Commission (FTC) voted 3-2 to approve a final rule banning noncompete agreements with all workers 120 days after publication in the Federal Register (i.e., on September 4, 2024), and invalidating existing noncompetes with all workers except senior executives. Ryan LLC, a national tax preparation service, filed suit challenging the FTC’s noncompete ban shortly after it was issued. The U.S. Chamber of Commerce and other business associations later joined the lawsuit. The parties challenging the noncompete ban filed motions to stay/enjoin the ban. Following briefing, the court indicated that it would decide the motions to stay/enjoin the noncompete ban without requiring a hearing. On July 3, 2024, the U.S. District Court for the Northern District of Texas enjoined the FTC from enforcing its noncompete ban against the plaintiff and plaintiff-intervenors in the Ryan lawsuit and stayed the noncompete ban as to those parties, but refused to issue a nationwide injunction or stay that would apply to other employers, see the court opinion. The court also refused to extend the scope of the injunction and stay of the noncompete ban to members of the U.S. Chamber of Commerce.
Read the full Alert on the Duane Morris LLP website.
Rhode Island Legislature Votes to Ban Noncompetition and Customer Nonsolicitation Covenants with Employees
On June 13, 2024, the Rhode Island House passed, and the state Senate passed in concurrence, a bill to amend the Rhode Island Noncompetition Agreement Act (Senate Bill 2024-S 2436A/2024-H 8059A), which would ban and void existing and future post-employment noncompetition and customer nonsolicitation covenants with virtually all employees.
The existing Rhode Island Noncompetition Agreement Act, which went into effect in 2019, already prohibits noncompetition agreements with nonexempt and “low-wage employees,” undergraduate and graduate students and employees age 18 or younger. The new bill would significantly expand that ban to include all employees, except in limited circumstances, and render all prohibited noncompetition agreements “null and void” and a “violation of public policy.”
Read the full Alert on the Duane Morris LLP website.
FTC Bans Almost All Noncompete Agreements
On April 23, 2024, the Federal Trade Commission (FTC) voted 3-2 to approve a final rule banning non-competes with all workers 120 days after publication in the Federal Register, and invalidating existing non-competes with all workers except senior executives. Although the final rule abandons many aspects of the rule proposed in January 2023 (see our prior Alert), the final rule represents a sea change in the law relating to non-compete clauses in the United States.
Read the full Alert on the Duane Morris LLP website.
FTC to Vote April 23 on Rule to Ban Noncompete Agreements
The Federal Trade Commission will vote at an open commission meeting to be held virtually on Tuesday, April 23, 2024, at 2:00 p.m. Eastern on its proposed rule banning employers from entering into noncompete agreements with workers. As reported in our prior Alert, the proposed rule would prohibit employers from entering into, maintaining, enforcing or threatening enforcement of a noncompete clause with virtually any worker and invalidate existing noncompete clauses with both current and former workers.
Read the full Alert on the Duane Morris LLP website.