Many civil rights and employee rights advocates were dismayed when a federal judge in Texas struck down the Biden administrations’ ban on worker non-compete agreements. This ban on employee non-compete agreements was to take effect nationwide in September 2024, and in doing so, it would have invalidated non-compete agreements affecting most US workers.
Non-compete agreements are widespread in all industries. An estimated 30 million employees, from craftsmen to executives, are bound by non-compete agreements. These non-compete agreements are contracts that restrict workers from switching employers within their industry.
The federal court’s striking the ban is discouraging news to employees who seek to better themselves by securing a better job position with a different employer who would pay higher wages and where there would be room for growth. It also is a disappointment to many employees who want to leave working for their employer to start a new business.
The ban against non-competes, if allowed, is implemented through a US government agency, the Federal Trade Commission’s, rules. The Federal Trade Commission issued its final rule (you may view the rule here) on the nationwide ban on April 23, 2024 in order to promote competition by banning employee non-compete agreements, thereby protecting the fundamental freedom of US workers to change jobs when they choose, and to facilitate new business formations throughout the country, and widely improve the US economy.
The Department of Labor and the Federal Trade Commission determined that non-compete agreements keep workers’ wages unfairly low, are inequitable for workers of all ages in all occupations, squash new ideas, and decelerate growth in the economy, including from the more than 8,500 new startups that would be created per year, once non-competes are banned.
On August 20, 2024, a Federal District Judge in Texas, an appointee of former President Trump, struck down the Federal Trade Commission ban, stating the Federal Trade Commission was did not have authority to issue the ban on employee non-competes.
The Texas court’s opinion disallowing the ban is contrary to a Pennsylvania judge's ruling in the prior month that rejected a similar challenge against the ban on non-competes. A Pennsylvania-based business had filed for a preliminary injunction against the Federal Trade Commission rule banning non-compete agreements, and in this case, the U.S. District Judge, who was appointed by President Joe Biden, found that the Federal Trade Commission was well within its legal authority to issue the ban. Due to this split among the courts, the matter of the ban will likely end up litigated in U.S. Supreme Court.
Corporations and groups who are opposed to the ban, argue that banning non-competes will make it difficult to safeguard company trade secrets and other proprietary and confidential business information. However, this argument is essentially a non-sequitur, because many businesses that do not have non-competes, nevertheless do have employee confidentiality agreements prohibiting disclosure and/or dissemination of certain information to safeguard company trade secrets and other proprietary and confidential business information. A properly drafted employee confidentiality agreement does not harm employees because it does not force employees to stay in unsatisfactory jobs, as does a non-compete agreement. Non-competes are not essential to protect against disclosure of confidential business information.
In New Jersey, for a non-compete agreement to be enforceable, NJ courts require that a non-compete agreement does not impose an undue hardship on the employee, that it protects the legitimate interests of the employer, and that the non-compete is not injurious to the public; and the court decides these issues on a case-by-case basis.
Don’t Sit on Your Rights
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If you are being subjected to such unlawful workplace discrimination or believe you are being pushed out of your job, contact Hope A. Lang, Attorney at Law today for a free consultation. I accept discrimination and whistleblower cases from all over New Jersey and have locations in Southern, Central and Northern NJ to meet with clients.
Hope A. Lang, Attorney at Law represents workers throughout the entire state, including Hackensack, Jersey City, Newark, Irvington, Orange, East Orange, Trenton, Paterson, Montclair, Elizabeth, North Brunswick, Cherry Hill, Vineland, Union, Plainfield, Hamilton Township, Lakewood, Edison, Parsippany-Troy Hills, Franklin, Lakewood, and every NJ County, including Bergen, Hudson, Middlesex, Essex, Monmouth, Somerset, Ocean, Union, Camden, Passaic, Morris, Gloucester, Atlantic, Burlington, Camden Counties.