Federal agencies and authorities must come together for small business to balance the necessity and hindrances of noncompete and nondisclosure agreements.
On Tuesday, a Texas federal judge blocked a noncompete ban from the Federal Trade Commission (FTC).
Under the rule formalizing the noncompete ban, the FTC was looking to provide employees with increased flexibility to quit a job and work for a competitor.
RELATED | NSBA Comments on FTC Noncompete Rules
Posing threat to small-business innovation and trade secrets by this increased flexibility, earlier this year, the U.S. Chamber of Commerce brought suit against this ban and was granted summary judgment in its case over the FTC.
A basis for the decision against the FTC centered around the judge’s interpretation that the FTC had exceeded its statutory authority in making the rule, further concluding the noncompete ban could cause irreparable harm to businesses and other enterprises, particularly those working in technology innovation and development.
The FTC is reportedly considering an appeal of this decision, and case-by-case considerations of noncompete agreements are still able to be adjudicated by the agency.
Ahead of the rule publication, in 2023, NSBA submitted formal comments to the FTC regarding the noncompete ban.
For many small, innovative businesses, noncompete and nondisclosure agreements ensure fair competition against larger companies who have greater ability to lure employees—and their working knowledge of the company—away from a smaller competitor.
NSBA also released a survey on how small businesses utilize noncompete and nondisclosure agreements which shows that the size of the business greatly impacts how likely they are to utilize—and successfully enforce—such agreements.
Follow NSBA as we continue tracking the progress of this lawsuit and information on noncompetes from the FTC, and read the noncompete rule here.
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