FTC non-compete ban got blocked — what's actually enforceable now?

The Texas court just struck down the FTC's non-compete ban. My CEO is asking if we can start enforcing our old non-competes again. We have about 40 employees who signed them, mostly sales and engineering.

But I'm also seeing articles saying California still bans them and other states have their own rules. Can someone explain what's actually enforceable now?

The FTC rule was blocked nationwide before it ever took effect, so we're back to pre-April 2024 status quo. Non-compete enforceability is determined by state law, which it always was.

For Texas specifically: non-competes are enforceable IF they're (1) ancillary to an otherwise enforceable agreement, (2) reasonable in time, geographic scope, and scope of activity, and (3) don't impose greater restraint than necessary to protect legitimate business interests.

Texas courts will reform overbroad non-competes rather than void them entirely, but you still need a legitimate interest to protect (trade secrets, goodwill, customer relationships).

If you have ANY employees in California, those non-competes are void and have been since 1872. California Business & Professions Code 16600 makes non-competes unenforceable, period. The FTC ruling didn't change that either way.

California also recently passed AB 2282 (effective Jan 1, 2024) which makes it illegal for employers to even include unenforceable non-competes in employment agreements for California employees. You can face penalties.

We have 5 remote employees in California. Do their non-competes become void because they're in CA, even though our company is in Texas?

Yes. California Labor Code 925 prevents employers from requiring California employees to agree to non-California choice of law or forum for employment disputes. Even if your agreement says "governed by Texas law," a California court won't enforce a non-compete against a California resident performing work primarily in California.

Some employers try choice-of-law clauses anyway. California courts have consistently struck them down for employment-related non-competes.

Employee perspective here. I signed a non-compete in Texas 2 years ago. 2-year duration, 50-mile radius, couldn't work for "any competitor in the software industry."

I got a competing offer last month. Asked my employer if they'd release me from the non-compete. They refused. So I talked to a lawyer who said "software industry" is way too broad to be enforceable — it doesn't identify a specific legitimate interest. He thinks they'd lose if they sued.

Took the new job. It's been 3 weeks, no lawsuit yet.

@NonCompete_Escaper — "any competitor in the software industry" would likely get reformed by a Texas court to something narrower, but Texas courts do reform rather than void. Your former employer could still sue and ask the court to enforce a reformed version.

That said, litigation is expensive. Many employers send a nastygram and don't follow through. The 3-week silence is a good sign.

Broader point for founders: if your employees have specialized knowledge that could hurt you competitively, non-competes aren't your only protection. Consider:

• Non-solicitation: Can't poach your customers or employees. Usually more enforceable than non-competes.
• Confidentiality/NDA: Can't use or disclose trade secrets. Enforceable almost everywhere.
• IP assignment: Anything they create belongs to the company.
• Garden leave: Pay them during the non-compete period. Dramatically increases enforceability.

A good separation agreement with these components often protects you better than a non-compete you can't enforce.

Thanks everyone. Talked to our employment counsel and we're going to:

1. Remove non-competes from our California employees' agreements entirely
2. Keep non-competes for Texas employees but narrow them to specific competitors
3. Strengthen our non-solicitation and confidentiality provisions for everyone

The FTC thing is still on appeal so we'll monitor, but not holding our breath for a nationwide ban anytime soon.