Top 10 Noncompete Developments of 2024

At a Glance

• It is expected that the second Trump administration’s newly constituted FTC Commission will abandon efforts to implement a nationwide ban on most noncompetes.
• California, Maryland, Minnesota, Rhode Island, Pennsylvania and Washington all enacted statutes in 2024 that limit the use of some noncompete agreements. 
• Courts across the country continue to push back on the enforcement of overbroad noncompete agreements, with some courts refusing to blue pencil exceedingly overbroad agreements.
• While 2024 signaled a challenging trend for employers seeking to protect confidential information and customer goodwill relationships through the use of noncompete agreements, state and federal courts continue to enforce narrowly tailored noncompete agreements in many jurisdictions.

Without a doubt, 2024 was a roller coaster of a year for employers in the area of noncompete law. From an Federal Trade Commission (FTC) attempted nationwide ban on most noncompete agreements, to continued state law action seeking to narrow the use of noncompete provisions, to a growing number of court decisions revealing deep frustration by judges asked to enforce overbroad post-employment restrictions, the message seems clear: Restrictions on the use of noncompetition or nonsolicitation agreements will remain a state issue, and overzealous employers can no longer rely on a court’s willingness to blue-pencil overbroad agreements. Employers looking to protect confidential information and customer goodwill through the use of noncompetition or nonsolicitation provisions are well-advised to stay abreast of state law developments and review existing agreements to ensure they are narrowly tailored to address judicially recognized protectable interests. 

Here is our list of the top 10 noncompete developments of 2024: 

1. The Federal Trade Commission issues its final rule seeking to ban most noncompetes nationwide, and a federal court precludes its enforcement.

In April 2024, the FTC published its long-awaited Final Rule seeking to implement a nationwide ban on most noncompetes. The Final Rule not only prohibited employers from entering into post-employment noncompetes going forward, but also prohibited employers from seeking to enforce noncompetes entered into before the effective date. The Final Rule carved out three slim exceptions for noncompetes entered into: (1) with high-level senior executives (but very narrow), (2) in the context of a sale-of-business; and (3) between franchisors and franchisees. The Final Rule also required employers to issue notices by September 9, 2024, to employees and former employees with existing noncompete clauses to advise them that their noncompetes were not enforceable. 

There were three notable and immediate challenges to the FTC’s Final Rule in three different federal district courts in Pennsylvania, Florida and Texas, all with differing outcomes. At issue in each case was: (1) whether the FTC exceeded its statutory authority in seeking to issue the Final Rule in the first instance; and (2) whether the rule was arbitrary and capricious. Ultimately, however, the U.S. District Court for the Northern District of Texas issued a decision in Ryan LLC v. Federal Trade Commission on August 20, 2024, in which it found that the FTC exceeded its statutory authority in promulgating the rule and that the rule was arbitrary and capricious. The Ryan court further ruled that its decision should have nationwide effect, and thereby set aside the Final Rule’s enforcement. 

The FTC has appealed the Ryan decision (as well as another decision out of Florida finding that the FTC exceeded its authority in promulgating the Final Rule), but the prospects of the Final Rule were cast further in doubt following President-elect Trump’s announcement on December 13, 2024, that he intends to appoint current FTC Commissioner Andrew Ferguson as the new chair of the FTC and to replace current Chair Lina Khan with Mark Meador. Commissioner Ferguson’s appointment does not need Senate approval, though Meador’s appointment will require Senate approval. Notably, Commissioner Ferguson issued a strong dissent when the Final Rule was issued in which he argued that the Final Rule “wildly exceeded” the FTC’s authority. As such, it is expected that with Meador’s anticipated confirmation, the newly constituted FTC Commission will either abandon its appeals or rescind the Final Rule altogether. 

2. The National Labor Relations Board’s general counsel issued a memorandum further attacking noncompetes.

On October 7, 2024, National Labor Relations Board (NLRB) General Counsel Jennifer Abruzzo issued a memorandum setting out the aggressive new remedies for unlawful noncompete and “stay-or-pay” provisions, as well as a framework for analyzing “stay-or-pay” provisions. This memorandum built on General Counsel Abruzzo’s May 2023 memorandum that the proffer, maintenance and enforcement of noncompete provisions violate the National Labor Relations Act (NLRA). While the memorandum is not binding, it was expected to cause the NLRB to carefully scrutinize any noncompete and/or stay-or-pay provisions before it. However, as with the FTC Final Rule, widely anticipated changes at the NLRB following the inauguration of President-elect Trump, including the replacement of General Counsel Abruzzo, will almost certainly lead to the repeal of these and other controversial memoranda.

3. Several states enact restrictions on noncompetes for health care practitioners.

Maryland, Rhode Island and Pennsylvania all enacted statutes in 2024 that limit the use of noncompete agreements for health care practitioners. 

In May 2024, Maryland enacted amendments to its noncompete law to ban noncompete provisions in: (1) agreements entered into on or after July 1, 2025, with licensed health care providers (e.g., physicians, nurses, dentists, pharmacists, physician assistants, nurse practitioners, psychologists and physical therapists) who provide direct patient care and earn total annual compensation of $350,000 or less; and (2) any agreements on or after June 1, 2024, with veterinarians or veterinary technicians. The statute allows noncompetes with such providers in the sale-of-business context, and only applies prospectively. 

In June 2024, the governor of Rhode Island enacted legislation invalidating noncompete clauses in nurse practitioners’ contracts, except in connection with the purchase and sale of a practice. That statute went into effect immediately. 

Finally, in July 2024, the governor of Pennsylvania signed the Fair Contracting for Health Care Practitioners Act into law. The new statute prohibits the enforcement of certain noncompete covenants entered into after January 1, 2025, by health care practitioners. However, the new statute allows enforcement of noncompetes against a health care practitioner who has resigned, if the length of the noncompete is one year or less. The statute also contains exceptions for the sale-of-business context and agreements designed to recover reasonable expenses from a departing health care practitioner. Finally, the statute imposes certain patient notification obligations on employers of health care practitioners when they leave their employment. 

4. Maine and Rhode Island governors veto legislation that would have banned most noncompetes in those states.

In March 2024, Maine Gov. Janet Mills vetoed legislation passed by the Maine legislature that sought to limit the use of noncompete agreements only to protect trade secrets (and then only if other less onerous restrictive covenants, such as a confidentiality agreement, offered insufficient protection, or if the affected employee had an ownership interest in the employer). And on June 26, 2024, Rhode Island Gov. Dan McKee similarly vetoed a bill that would have banned nearly all noncompetes and customer nonsolicits in Rhode Island.

5. New York legislature lets stand governor’s veto.

On June 20, 2023, the New York State legislature passed a bill to prohibit any future use of noncompete agreements in that state. Gov. Kathy Hochul vetoed the legislation on December 22, 2023. In remarks to the press before issuing the veto, the governor signaled her desire to see the law modified to focus on protecting low- and middle-income workers, (i.e., by potentially limiting the ban to individuals earning less than $250,000 per year). However, during the final negotiations, the governor and lawmakers could not agree on the compensation threshold and how it should be calculated. The New York State legislature passed no subsequent legislation in 2024. That said, recent decisions by New York courts suggest an increased sense of hostility toward noncompete agreements and less tolerance for overbroad language.

6. Minnesota enacts new law banning restrictive covenants in service contracts. 

Effective July 1, 2024, Minnesota law now prohibits agreements between service-provider companies and their customers that prohibit customers from hiring service-provider employees and independent contractors. The statute prohibits service providers from entering into any agreements on or after July 1, 2024, that restrict “in any way a customer from directly or indirectly soliciting or hiring an employee of a service provider.” The law broadly defines “service provider” as any person or entity “acting directly or indirectly as an employer or manager for work contracted or requested by a customer.” The law has a narrow restriction for workers providing professional business consulting for computer software development and related services. 

7. California broadens noncompete protections for California residents. 

California law has long prohibited enforcement of most noncompete agreements. However, effective January 1, 2024, California took things a step further by enacting legislation that prohibits employers from entering into or attempting to enforce a noncompete against California employees. Further, the law required employers to provide written notice by February 14, 2024, to current employees (and any former employees who were employed on or after January 1, 2022) who signed an agreement containing a noncompete, that the noncompete was invalid. Finally, the law creates a private right of action for impacted employees to recover damages, fees and costs for successful enforcement.

8. Washington expands noncompete protections.

Effective June 6, 2024, Washington enacted several changes to Chapter 49.62 of the Revised Code of Washington. First, a “noncompetition covenant” now also includes an agreement that directly or indirectly prohibits the acceptance or transaction of business with a customer. Additionally, the definition of “nonsolicitation covenant” was narrowed to only apply to current customers of the employer. The previous definition of a nonsolicitation covenant made no distinction between current and past customers. The law also limits the “sale of a business” exception to transactions where the person signing the covenant purchases, sells, acquires or disposes of an interest representing 1% or more of the business.

The new law also clarifies that the time for disclosing the terms of a noncompete is before the “initial oral or written” acceptance of an offer. The revised law also renders void and unenforceable a provision that “allows or requires the application of choice of law principles or the substantive law of any jurisdiction other than Washington state.” The revised statute also removes the requirement that an aggrieved person be a party to the contract in order to bring a cause of action under the statute. 

9. Delaware’s Court of Chancery continues to push back hard on the enforcement of overbroad noncompete agreements, and Minnesota federal court follows the lead.

Adding to a series of cases in 2023 reflecting a healthy skepticism both for enforcement of noncompete agreements and Delaware choice of law provisions, the Delaware Court of Chancery issued another emboldened decision in September 2024 in which it refused to blue-pencil (or modify) an overbroad noncompete, even where the agreement at issue allowed for blue-penciling.

In Fortiline v. McCall, the plaintiff employer sought a preliminary injunction to enforce a one-year noncompete that prohibited a former employee from engaging in any activity in competition with not only the employer, but all of the employer’s “affiliates and subsidiaries,” many of which operated in different business lines and different geographies. The court found that the employer failed to show any legitimate business interest served by shielding all of its unspecified affiliates, and failed to show that the employee had access to any kind of information that would warrant such a broad restriction. Given the vast overbreadth of the restriction, the court refused to narrow the scope of the noncompete, noting that “[t]he availability of blue-penciling supports a regime of ‘sprawling restrictive covenants’ in a ‘no-lose situation for employers’” and that “the differences in bargaining power between repeat-player business and individuals suggest that when a restrictive covenant is unreasonable, the court should strike the provision in its entirety.” The court concluded, “When the policy against unreasonable restraint on trade calls a court to strike a covenant and decline to blue pencil it, the court is unhindered by a provision in the same uneven agreement that purports to promote blue-penciling.”

The Delaware Supreme Court more recently affirmed the Chancery Court’s healthy skepticism towards blue-penciling in Sunder Energy, LLC v. Jackson. C.A. No. 455, 2023 (Del. Dec. 10, 2024). Rejecting the appellant’s argument that the trial court’s refusal to “blue pencil” the agreements contravened “decades of Delaware law” and the state’s commitment to freedom of contract, the supreme court concluded: “Whether a court should blue pencil a covenant cannot turn on the egregiousness of the employee’s conduct. Rather, the court’s decision to exercise that equitable power should be based on the covenants themselves and the circumstances surrounding their adoption[.]”

The Delaware Chancery Court is not the only court refusing to apply the blue-pencil doctrine. In a strikingly similar opinion, the U.S. District Court for the District of Minnesota issued a decision in September 2024, in which it also refused to blue-pencil an overbroad noncompete. In CH Robinson Worldwide v. Traffic Tech, Inc., Judge Katherine Menendez struck down and refused to blue-pencil nonsolicit agreements which she found effectively prohibited lower-paid, largely entry-level employees from working anywhere in the logistics industry for two years. Judge Menendez was especially critical of the fact that the agreements went beyond what she thought was reasonably necessary to protect customer goodwill insofar as they: (1) went beyond active soliciting; (2) extended to customers and entities with whom the individuals had no relationship, including “potential” customers; (3) had no geographic limit; and (4) essentially created a de facto noncompete agreement because of its “unbounded, industry-wide ban on working for [CHR’s] competitors.”

10. Not all is lost for employers; appropriately crafted noncompetition agreements are still enforceable.

While 2024 signaled a challenging trend for employers seeking to protect confidential information and customer goodwill relationships through the use of noncompete agreements, state and federal courts continue to enforce noncompete agreements in many jurisdictions. A recent case from the U.S. District Court for the District of Massachusetts showed just that. In Grimes and Co. v. Carlson, No. 4:24-cv-11521-MRG (D. Mass. Dec. 13, 2024), the district court granted a preliminary injunction, which included findings that (a) the identities of clients can be protectable, confidential information — even if their contact information is publicly available; and (b) a departing employee’s announcement of new employment can constitute “solicitation.”