On April 23, 2024, the Federal Trade Commission issued its Non-Compete Clause Rule with a stated effective date 120 days after publication of the rule in the Federal Register. The rule, and the FTC’s authority to issue the rule, are controversial1. The rule is currently the subject of at least two lawsuits.2
Lex Machina has recently added analytics to its federal district court contracts module with respect to non-compete clauses.
Lex Machina defines cases which are tagged non-compete as:
Contracts cases involving a dispute between an employer and an employee arising out of a clause in the employee’s employment contract which prohibits the employee from performing similar work for another employer within a specified geographical area and for a specified duration of time after termination of the employment relationship. This tag also includes cases with a claim arising out of a contract clause in connection with the sale of a business or a franchise agreement which prohibit a business seller or franchisee from operating certain businesses within a specified geographical area and for a specified duration of time after the sale of the business or termination of the franchise agreement.
During the 10-year period from January 1, 2014 to December 31, 2023, over 6,000 cases involving non-compete clauses have been filed in federal district court (averaging approximately 600 per year).
During that same 10-year period, over 2,800 of the non-compete cases (2,867) also included claims based on trade secrets.
Additionally, over 900 (908) of the non-compete cases during the 10-year period involved claims related to trademark.
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[1] See e.g., Erik Weibust and Stuart Gerson, The FTC’s Noncompete Rule is Likely Dead on Arrival, Law 360 April 26,2024.
[2] Chamber of Commerce of the United States of America et al. v. Federal Trade Commission et al., case number 6:24-cv-00148, U.S. District Court for the Eastern District of Texas and Ryan LLC v. Federal Trade Commission, case number 3:24-cv-00986, U.S. District Court for the Northern District of Texas.
Read more at: https://www.law360.com/articles/1833820.