The Current State of Non-Competes: How the Recent FTC Rule Affects Missouri Employment Attorneys

Mon, Feb 17th, 2025 | by Miles Mediation and Arbitration | Article | Social Share

By Kelly K. James

On April 23, 2024, the Federal Trade Commission (FTC) announced a final rule that attempts to eliminate almost all post-employment non-compete covenants. The validity of the rule is currently being litigated and the results of that litigation will likely have a tremendous impact on these common employment provisions. Here’s a closer look at what these recent developments may mean for Missouri employment attorneys, and for Missouri companies.

The New Rule is No Surprise

“The ban on such agreements for non-senior employees is not surprising,” says Melvin D. Kennedy, an attorney who practices labor and employment law and a mediator at USA&M in St. Louis. “I have always found it curious how, on the one hand, Missouri employers argue that signing an employee handbook does not create a contractual employment agreement. And on the other hand, contractual provisions that bind the employee are often embedded in the handbook (i.e., arbitration provisions and non-compete agreements).

“It does surprise me that non-compete agreements with senior executives are banned,” added Kennedy. “Senior employees are more likely to have negotiated an employment agreement. It strikes me that two parties with comparable bargaining positions should be allowed to bind themselves contractually to doing, or not doing, any lawful act. I would not be surprised to see that aspect of the rule scaled back or invalidated.”

The three-to-two vote invalidating non-competes was also no shock to labor and employment attorney Cardina F. Johnson, deputy general counsel of IEA/NEA and a mediator at USA&M. “Three of the five commissioners were appointed by President Biden, and it is not all that surprising that those tasked with interpreting Section 5 of the Federal Trade Commission Act did it in a way that innately aligns with fundamental views and values of the political party that appointed them,” says Johnson. “Mutual alignment is an undeniable, recurring pattern, not only for presidential appointments, but also when executive teams hire leadership generally within corporate America as well as governmental entities on the local, state and national levels.”

The potential scope of the FTC’s rule was, however, surprising to Johnson. “It is estimated that nearly 30 million workers are subject to non-competes,” says Johnson. “That is nearly 20 percent of the American workforce, which highlights what a widespread practice non-competes truly are.”

What Will Happen with the Ongoing Litigation?

While some states already have laws invalidating non-competes, it’s impossible to predict the results of the ongoing litigation challenging the FTC’s rule. “Given the diverse challenges filed in federal courts and the arguments presented, the outcomes could vary significantly,” says Johnson. “Some legal experts predict that injunctions may delay or prevent the rule from taking effect and I tend to agree. If the litigation progresses to higher courts, including the Supreme Court, it could establish precedents regarding the federal authority to regulate non-compete agreements altogether. Thus, the result remains uncertain pending judicial review. Now that non-compete agreements are at the forefront of legal debate, however, a potential uptick in the number of states that begin to adopt or modify their own non-compete laws should be anticipated.”

“Much like other legislation and rulemaking, the courts will opine on this rule, and it may be appealed up through the courts,” says Kim L. Kirn, a mediator at USA&M who handles employment cases. “However, non-compete clauses are a drag on our economy. Workers who are ready to leave their employer are barred by the non-compete clauses, particularly the broad overbroad clauses that virtually keep a worker from any job in their field. I have litigated and mediated non-compete clauses and too many of them are written with overbroad language.”

The Takeaway for Employment Attorneys

So, what should employment attorneys do in the meantime? Keep your clients apprised of the ongoing legal developments and prepare for upcoming changes in non-compete enforcement. You should also review existing agreements and assess their vulnerability to change under the final FTC rule. “Monitor the progress of litigation closely and be ready to adopt strategies and recommend policies based on judicial outcomes,” says Johnson.

Let clients know that there are ways to protect intellectual property and confidential information that don’t involve non-competes. “Rather than requiring employees to sign a non-compete clause, regardless of whether they are separately compensated for that clause, consider including contract language protecting your trade secrets,” suggests Kirn. “This protection is permanent and has been upheld by the courts. I suggest discontinuing the use of non-compete clauses. Why invite litigation over enforcing the non- compete clause when public policy has now been determined that non-compete clauses are an unfair bar on competition? There are other ways to protect your business.”

A Critical Time for Employment Attorneys  

Note that the ongoing litigation makes this a hot issue for Missouri employment lawyers. “It would be in the best interest of the legal community to pay attention to potential disputes over defining terms like ‘senior executives’ and the broader economic and legal effects of limiting contractual agreements,” says Johnson. “While the FTC’s adoption of the rule may not be surprising given current trends, its ultimate enforcement hinges on the outcomes of ongoing litigation, making it a critical period for legal strategizing and client advisement in employment law.”

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