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Whether you’re preparing legal documents or resolving a serious dispute, our attorneys offer the reliable and practical counsel you need to get results.

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What does the FTC’s Noncompete Rule mean for Texas businesses?

On Behalf of | Jul 11, 2024 | Business Law

When it comes to running a business smoothly, it is important for owners to protect their operation’s interests and private information. Non-compete agreements are one way to do this.

Non-compete agreements are currently legal in Texas. However, could a new rule shake things up for businesses in the state?

How can a non-compete protect a business?

These agreements mean that a worker cannot compete with their current employer after the end of their employment period. They usually extend for a period of six months to a year. Common examples of the terms in these agreements could include:

  • An employee may not work for a competitor
  • They may not reveal trade secrets
  • They may not work in a certain location
  • They may not work in the same field

Such terms can protect your company’s interests by preventing competitors from gaining an edge over yours.

The FTC’s looming rule

The Federal Trade Commission recently revealed its new Noncompete Rule which could ban businesses all over the U.S. from enforcing new non-compete agreements for all employees. It was set to take effect in September this year.

However, a Texas federal court recently issued a partial block on the rule, leaving it up in the air. This is after some business groups challenged it, claiming the FTC bypassed its statutory authority by labeling all non-competes as unfair.

If the rule were to succeed depending on the court’s final ruling, businesses in Texas may not be able to enforce already active non-compete agreements on current employees except for existing ones on senior-level executives. Companies that violate the rule once it becomes effective might even face legal penalties.

While non-compete agreements can protect your business operations, it may be time to look into alternative methods to protect your company’s interests as the situation unfolds.