Few employment law developments in recent years have received as much attention from businesses, HR professionals, and employment attorneys as the Federal Trade Commission’s proposed rule that would effectively ban most non-compete agreements nationwide. The announcement sent a wave of uncertainty through industries that have long relied on non-competes as a standard tool for protecting competitive business interests — and the legal and legislative responses to the FTC’s action made clear that the future of non-compete enforcement in the United States is genuinely unsettled.
Mandelbaum Barrett PC’s labor and employment law practice advises New Jersey and New York employers on non-compete agreements, trade secret protection, restrictive covenant enforcement, and the developing federal and state law that governs whether these agreements can be enforced. The firm’s attorneys help businesses evaluate the agreements they have in place and design enforceable protections for their legitimate business interests.
What the FTC Rule Would Have Meant for Employers
The FTC’s final rule, issued in April 2024, would have banned virtually all new non-compete agreements with workers and required employers to provide notice to current and former workers that any existing non-competes were no longer enforceable. The rule was extraordinarily broad in scope, applying to the vast majority of employment relationships and eliminating the traditional state-by-state variation in non-compete enforceability that employers and workers had navigated for decades. According to the FTC, an estimated 30 million workers across the country were subject to non-compete agreements at the time the rule was announced.
Courts moved quickly to address challenges to the rule, and a federal court issued a nationwide injunction blocking the rule from taking effect. The litigation landscape has remained uncertain since. Employers waiting for a definitive resolution should not treat ongoing legal proceedings as permission to assume that nothing has changed — state-level restrictions on non-competes continue to evolve independently of the FTC rule, and both New Jersey and New York have their own legal frameworks governing when and whether non-competes will be enforced.
What Employers Should Know About Non-Competes Right Now
The FTC’s action, whatever its ultimate fate, has already changed the practical calculus for employers who rely on non-compete agreements. Courts have become more willing to scrutinize these agreements for reasonableness, state legislatures have been emboldened to limit their enforceability, and workers have become more aware of their rights to challenge agreements they believe are overbroad or unenforceable. Employers who continue to use outdated non-compete templates drafted years ago should review those agreements against current state law standards before they need to enforce them.
New Jersey courts apply a reasonableness standard in evaluating non-competes, looking at whether the agreement is necessary to protect a legitimate business interest, whether it imposes more hardship on the employee than is justified by the employer’s interest, and whether it is contrary to public policy. An agreement that might have been enforceable a decade ago may not pass current judicial scrutiny, and businesses that have not reviewed their restrictive covenant agreements recently may be working from a false sense of security about the protection those agreements actually provide.
According to the Federal Trade Commission, the agency has continued to take the position that widespread non-compete use harms competition and workers, and the agency can still bring individual enforcement actions against non-compete practices that violate Section 5 of the FTC Act even if the broader rulemaking does not survive court challenge.
Contact Mandelbaum Barrett PC for Non-Compete Guidance
If your business needs to review, update, or enforce non-compete agreements, or has questions about how the evolving federal and state legal landscape affects your restrictive covenant strategy, the labor and employment law team at Mandelbaum Barrett PC can help.
Reach out through our contact page to speak with our attorneys. We are here to help New Jersey and New York employers protect their legitimate business interests while navigating the ongoing changes in non-compete law.