The FTC’s Proposed Final Noncompete Rule: What It Means for South Carolina

*This blog will be updated with new information as it becomes available*

UPDATE: On July 3, 2024, federal judge Ada E. Brown of the Northern District of Texas issued an injunction pending litigation on the FTC’s noncompete rule, effectively putting it on hold. The ban on noncompetes was set to go into effect on September 4, 2024. The court says that it will issue a final order on the merits by August 30.

ORIGINAL POST:

The Federal Trade Commission (FTC) released its final proposed rule on noncompetes on Tuesday, April 23, 2024. If adopted, the Non-Compete Clause Rule would ban new noncompete agreements altogether for all workers (with very few exceptions) as of the effective date, which could be as soon as late August. (The effective date is 120 days after the publication of the rule in the Federal Register, according to the 570-page PDF which you can find here.)

The rule is already being challenged. The U.S. Chamber of Commerce and the tax firm Ryan LLC both filed lawsuits in Texas on Wednesday aiming to stop the rule from going into effect.

South Carolina, like most states, does allow noncompete agreements, aka covenants not to compete. How would this rule affect the workers and employers in our state?

What the FTC’s Proposed Noncompete Rule Means for South Carolina Businesses

On this blog we’ve previously looked at how SC courts view covenants not to compete; they are enforceable as long as they are reasonable and don’t overly restrict the worker’s ability to find gainful employment. Covenants not to compete that are excessively restrictive in terms of duration, geographic location, and/or industry will be found to be unenforceable.

The FTC’s noncompete rule, if adopted, would override state law. No new noncompete agreements would be allowed in South Carolina for any kind of worker (with very few exceptions), not even for “senior executives” who earn more than $151,164 annually and are in a “policy-making position.”

What about existing noncompete agreements? Existing noncompete agreements for senior executives would remain in force as of the effective date. Extant noncompete agreements for other kinds of workers in South Carolina would no longer be enforceable after the effective date.

Is the FTC’s Proposed Noncompete Rule Likely to Go into Effect?

We don’t know for sure, but many people are predicting that the proposed rule will fail, including former FTC general counsel Alden Abbott (via Forbes). Or if it does go into effect, it will likely not be permanent. The rule is already being challenged and will certainly continue to be challenged, as many view it as exceeding the FTC’s authority.

Here at the Gem McDowell Law Group, we also think it’s unlikely that this rule is here to stay. We will follow this story closely and provide updates – stay tuned.