Here's what the federal judge's partial blocking of the FTC ban on noncompetes means for workers.

• An estimated 30 million Americans are subject to a noncompete agreement, according to the FTC.
• Clients frequently overlook the consequences of employment agreements or believe they are unenforceable, according to employment attorneys.

The future of the Federal Trade Commission's ban on noncompete agreements, set to be enforced this fall, remains uncertain following a preliminary court ruling last week.

An estimated 30 million Americans are bound by noncompete agreements, which restrict their ability to work for competitors or start businesses in the same industry.

In January 2023, the Biden administration suggested prohibiting noncompete agreements. Following this proposal, the FTC received over 26,000 comments, with 25,000 of them expressing support for the rule.

Legal challenges on noncompete ban

Last week, Ada Brown, a Trump-appointed federal judge in Texas, issued a preliminary order against the FTC ban in a lawsuit brought by Ryan LLC, a Dallas-based tax services firm. The firm uses noncompete agreements to prevent competitors from hiring away its workers and to prevent workers from poaching firm clients. Ryan argued that the FTC exceeded its legal authority to ban noncompete agreements.

The court ruled that the FTC does not have the authority to implement a broad rule and that the plaintiffs are likely to succeed in their case.

The Supreme Court decision to overturn the Chevron doctrine, which grants judges greater authority to challenge federal agencies' rule-making powers, led to the issuance of the injunction.

The injunction issued by Brown limits its enforcement to the FTC and prevents it from enforcing the ban against the plaintiffs, including Ryan LLC and the U.S. Chamber of Commerce, the Business Roundtable, and other business groups. However, it does not apply to member companies of those groups.

The judge plans to rule on the merits of the case by the end of August, and experts predict that business groups will attempt to persuade her to issue a nationwide ban.

What a noncompete means for workers

Noncompete agreements can have a significant impact on workers, and employment attorneys advise clients to be aware of their scope and enforceability.

Peter Rahbar, an employment attorney, stated, "Examine the deferred compensation linked to it, which you must repay if you breach it."

Noncompete agreements can make it challenging to find employment in other states where they are prohibited or restricted.

Some employers won't consider a potential candidate if they have a noncompete, according to Rahbar, the founder of the Rahbar Group in New York City.

Noncompete enforcement can be 'heavy handed'

Despite state bans, some companies forcefully enforce noncompete agreements, which are not limited to highly compensated workers. These agreements often require employees to pay all legal fees if an agreement is challenged, making it challenging to break even if the agreement is questionable legally.

If employees are sued, they may have to pay between $100,000 and $150,000 in attorney fees, even if they win the case, according to Daniel Kalish, an attorney with HKM Employment, who spoke in support of the ban at a hearing before the Federal Trade Commission last year.

Despite being laid off from his multi-national employer, the noncompete he had signed prevented him from working in the industry for five years.

"The executive, who wished to remain anonymous to avoid being sued by their former employer, stated that it would have cost between $500,000 and $1 million to fight, with no assurance of success. They added, "The issue is, what are you going to say? No, I'm not going to sign this, and then you won't get promoted.""

Although attempts have been made to prohibit noncompete agreements, Rahbar claims that companies have become increasingly assertive in employing them.

He stated that he had observed employers being overly strict and forceful in implementing certain policies in some instances.

If you're asked to sign a noncompete

Before signing any document, it's best to have an attorney review it first.

You may be able to negotiate the terms of a noncompete agreement, including its duration, scope, and definition of competition, according to experts.

Employers may use confidential information or proprietary information agreements to prevent employees from disclosing sensitive corporate information or trade secrets, which serves the same purpose as a noncompete.

"Even if not everyone can negotiate, it's worth a try," Rahbar advised.