Gibson Dunn, Sullivan & Cromwell Tapped to Challenge FTC’s Noncompete Ban | The American Lawyer (2024)

What You Need to Know

  • Lawyers at Sullivan & Cromwell and Gibson Dunn are spearheading legal fights against the FTC's newly unveiled ban on noncompete agreements.
  • The lawyers are representing the U.S. Chamber of Commerce and tax services firm Ryan LLC.
  • Both law firms have a history of challenging federal agencies.

The country’s largest businesslobbyinggroup has selected Sullivan & Cromwell as outside counsel inits federal challenge to the Federal Trade Commission’s ban on noncompete clauses. Meanwhile, former Department of Labor Secretary Eugene Scalia and colleagues from Gibson, Dunn & Crutcher entered appearances for tax services firm Ryan LLC in the first federal actionfiled against the commission this week.

Lawsuits filed Tuesday and Wednesday by Ryan and the U.S. Chamber of Commerce, respectively, challenge the FTC’s newly published rule, unveiled Tuesday,that seeks to prohibit companies from enforcing noncompete agreements in most cases.

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Gibson Dunn, Sullivan & Cromwell Tapped to Challenge FTC’s Noncompete Ban | The American Lawyer (2024)

FAQs

What is the FTC rule on noncompetes legal challenges? ›

The FTC issued a final rule that: Bans virtually all new non-compete agreements after the effective date. Renders unenforceable all existing non-compete agreements with employees who do not meet the criteria for a “senior executive.”

Are non competes enforced where the cause of action accrued prior to the rule's effective date? ›

No, the rule expressly states that its requirements do not apply where a cause of action related to a non-compete clause accrued prior the effective date of the rule.

Will the FTC's non-compete ban become law in 2024? ›

US FTC Rule Banning Non-Competes. On April 23, 2024, the U.S. Federal Trade Commission voted 3-2 to finalize and promulgate a rule banning most non-compete clauses in employer-employee contracts.

What voids a noncompete agreement? ›

However, certain factors can render a non-compete agreement unenforceable, such as if it is considered unreasonable in time or geographic scope, or if the reason for termination, such as the employer discontinuing a line of business, invalidates the agreement.

Are all non-competes banned now? ›

The Final Rule bans almost all non-competes between employers and workers, but does not explicitly ban non-disclosure agreements, customer non-solicitation agreements, or employee non-solicit agreements.

How enforceable are non-competes? ›

Under a new Federal Trade Commission rule, for-profit employers are prohibited from entering into new non-compete agreements with all employees, including senior executives. Existing non-compete agreements with senior executives remain enforceable.

Did the Supreme Court rule on non-compete agreements? ›

The case is noteworthy because the Supreme Court has now decisively shut the legal door on non-competition agreements that do not fit within specific statutory exceptions. The federal courts interpreting California law had permitted some non-compete agreements under a narrow-restraint exception.

What is Section 5 of the FTC Act unfair? ›

Section 5(a) of the FTC Act, 15 U.S.C. Sec. 45(a), prohibits, inter alia, “unfair methods of competition.” Unfair methods of competition include any conduct that would violate the Sherman Antitrust Act or the Clayton Act.

What is the FTC breach rule? ›

The Rule requires vendors of personal health records and related entities to notify consumers following a breach involving unsecured information. In addition, if a service provider to one of these entities has a breach, it must notify the entity, which in turn must notify consumers.

What is the FTC holder rule? ›

The Preservation of Consumers' Claims and Defenses [Holder in Due Course Rule], formally known as the "Trade Regulation Rule Concerning Preservation of Consumers' Claims and Defenses," protects consumers when merchants sell a consumer's credit contracts to other lenders.

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