On April 23, 2024, the Federal Trade Commission (FTC) voted on—and approved—a final rule to ban almost all non-competition agreements in the United States. The rule is set to become law as of September 4, 2024, if not stayed before that date.
The final rule generally tracks the FTC’s previously proposed rule from January 2023 and has several key components. Most notably, the new rule would ban all new post-employment non-compete agreements and preclude enforcement of most existing post-employment non-competes, regardless of industry or type of worker. Under the FTC rule, “workers” include employees and independent contractors among others. Employers would also be required to notify those workers with existing post-employment non-compete agreements that they are no longer enforceable.
Importantly, the new rule does not restrict employers from entering into agreements which would bar workers from engaging in competitive activity during their employment. The FTC also stops short of banning other restrictive covenants, including many non-solicitation provisions.
The FTC’s ban would not extend to all workers. Specifically, those carved out from the rule include “senior executives” with non-competes in place prior to the September 4, 2024, effective date. “Senior executives” are defined by the FTC as those employees “earning more than $151,164 annually and who are in a policy-making position.” There is also an exception for non-competes restricting the seller of a business, which would remain enforceable under the rule.
The rule is already subject to challenge in several lawsuits which have been consolidated before the United States District Court for the Eastern District of Texas, with the plaintiffs requesting entry of a preliminary order which would stay the effectiveness of the FTC rule pending final resolution of the litigation. Anyone with an interest in this rule is advised to be on the lookout for further updates as initial decisions in the federal litigation in Texas are expected in the coming weeks.
By Aaron Voloj Dessauer, Executive Director of the Institute of Law, Technology & Innovation
The 2024 term will be remembered as one that redefines the ways citizens interact online, both with elected officials and one another, and how the government interacts with social media platforms, which are increasingly the place where political discourse primarily takes place. Three cases in particular pose novel questions regarding the First Amendment in the age of social media:
Lindke v. Freed (and its companion case O’Connor-Ratcliff v. Garnier) dealt with the issue of whether a public official, who prevented someone from commenting on the official’s social media page engages in state action or whether this constitutes private action. Murthy v Missouri raises the question of when informal government pressure on social media companies to restrict disfavored speech crosses the line into violating the First Amendment. And Moody v. Netchoice (and its companion case, NetChoice v. Paxton) deals with the issue of whether the government can force social media companies to distribute speech against the platform’s will or whether social media companies have First Amendment rights, akin to newspapers, to have editorial authority as to what gets published.
These novel issues are of great importance when less than a handful of social media companies, through their network effect, have a greater influence than newspapers, magazines and other legacy media ever had. For example, 175 million Americans are on Facebook, 120 million Americans are on Tiktok and a reported 45% of Facebook and Tiktok users report to regularly get their news from them.[1 By contrast, the largest six newspapers (the New York Times, the Wall Street Journal, USA Today, the New Post and Los Angeles Times) have a circulation of less than 1 million combined (!), with a much larger readership base online[2] – meaning newspaper, too, face the pressure of writing stories that increase user engagement, are “liked” and “retweeted” and go viral on social media. In other words, social media has reshaped how we read, write and distribute news.
To make matters even more complicated, in April, the U.S. Congress passed a law threatening to ban Tiktok in the U.S. if its Chinese-owned parent company ByteDance does not divest from its US-subsidiary. Supporters of the bill argue that TikTok is a national security threat; critics claim that there is no proof that the Chinese government influenced the content on the platform and that an outright ban is an unprecedented violation of the users’ (and company’s) First Amendment rights. The Supreme Court will hear challenges to the TikTok ban in September.
As the Chinese proverb goes, may you live in interesting times. These are interesting times, indeed, with novel problems that have no obvious solutions. Students at FSU Law School learn about these cases not only in their traditional Constitutional Law and First Amendment law classes but also in new course offerings, including the Civil Liberties in the Digital Age seminar led by Dr. Aaron Voloj Dessauer, the inaugural executive director of the Institute of Law, Technology and Innovation.
The Institute of Law, Technology and Innovation has also launched a Law and Tech focus, within the existing Business Law certificate, which allows our J.D. students to study law and tech-related issues at more depth and signal’s FSU College of Law’s further commitment to become the premier place to study issues related to technology and innovation.
[1] Katerina Eva Matsa, More Americans Are Getting News On TikTok, Pew Research Center (Nov. 15, 2023). [2] Press Gazette, Top 25 US newspaper circulations: Print circulations of largest titles fall 14% in year to September 2023, March 8, 2024, available at https://pressgazette.co.uk/media-audience-and-business-data/media_metrics/us-newspaper-circulation-2023/
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