By Nicholas E. Williams

A federal district court recently ruled that the Federal Trade Commission’s ban on employment-based non-competes is unlawful and therefore shall not be enforceable or otherwise become effective. The FTC reportedly will consider appealing that decision.[1] The FTC has not yet filed a notice of appeal, which is due on or before Monday, October 21, 2024.[2]

Earlier this year, the FTC voted to enact Part 910 of Title 16 of the Code of Federal Regulations—a federal regulation banning most employment-based non-competes.[3] That rule was set to become effective on September 4, 2024.[4] But, based on summary judgment entered in the Northern District of Texas, Part 910’s non-compete ban and notice requirements will not take effect on September 4, 2024.[5]

The Northern District of Texas Opinion

The opinion supporting summary judgment declares that the FTC did not have statutory authority to enact Part 910 and that the FTC’s non-compete ban is “arbitrary and capricious.” According to the court’s reasoning, neither Section 6(g) nor Section 18 of the FTC Act provide a basis for the FTC to substantively regulate “unfair methods of competition.”[6] The decision’s statutory authority analysis ends there, leaving other arguments like the “major questions” doctrine unaddressed.[7] The court further determined that the FTC’s non-compete ban was “arbitrary and capricious,” and therefore illegal, because the ban is “unreasonably overbroad.”[8] According to the decision, the FTC enacted the ban based on inapposite evidence and without consideration of appropriate alternatives.[9] Having determined that Part 910 is illegal, the court held that Fifth Circuit precedent interpreting the Administrative Procedures Act requires a nationwide set aside of the illegal agency action.[10] Thus, because the FTC enacted the ban without proper evidence, consideration, or authority, the court ruled that Part 910 shall not become effective.[11]

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By Nicholas E. Williams

On April 24, the Federal Trade Commission voted to enact Part 910 of Title 16 of the Code of Federal Regulations, banning employment-based non-compete provisions and requiring businesses to provide notice to affected employees.[1] While challenges to the FTC’s Part 910 already are underway,[2] if upheld, the regulations will supersede state law and vitiate otherwise valid employment-based covenants not to compete. Unless enjoined, Part 910 will take effect on September 4, 2024.[3] Thus, businesses that have utilized these contractual restrictions need to reevaluate their strategy to protect their businesses’ relationships and information. Businesses should (1) know whether their agreements fall within the scope of Part 910, (2) track challenges to Part 910, and (3) develop strategic plans to address Part 910.

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By Ed Chaney

The Business Law Section invites you to join its annual section program on February 8-9 in Winston-Salem and via live webcast. This year’s theme is “The Times They Are A-Changing for Business Lawyers,” and as the title suggests, we will be focusing on a number of important recent developments in the field of business law.

Presentation topics include the Corporate Transparency Act, corporate DE&I programs in the wake of recent judicial cases, artificial intelligence, a North Carolina legislative update, and the always popular case law update. We will also hear the latest trends in business succession, valuation, and employment relationships, among others.

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By Marc E. Gustafson

Having been involved in a fair number of due diligence reviews over the course of my career, I can’t imagine there is a single due diligence checklist that doesn’t include an examination of key employment agreements. And anyone tasked with performing that assessment would certainly check to ensure those agreements include post-employment restrictions for those key employees. Having litigated employment disputes for over 20 years, however, I’ve come to the realization that going just a few steps further than what may be found on the typical diligence list can prevent a lot of headaches, distractions, and costs that so often occur post-transaction.

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By Heyward Armstrong, Dave Clement, and Justin Truesdale

The North Carolina General Assembly recently approved Senate Bill 507 (the “Act”),[i] which makes a number of significant changes to the North Carolina Business Corporation Act (“NCBCA”), and the governor signed the Act into law on August 16, 2021.[ii] Certain provisions of the Act were effective immediately, and the remaining provisions of the Act became effective on October 1, 2021.

The bill resulting in the Act was drafted by the Business Corporations Committee of the Business Law Section (the “Committee”) and approved as “Association-sponsored legislation” by the NCBA Board of Governors in January 2021. The North Carolina Bar Association is grateful for the endorsement and support of the North Carolina Chamber and thankful to the bill’s primary sponsor Senator Amy Galey and Representative Destin Hall who ably shepherded the bill through the legislative process to enactment.

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