Federal Trade Commission building in Washington, D.C, on January 12, 2022. Photo: Diego M. Radzinschi/ALM Noncompete Agreements Survive the FTC and a Noncompete Provision Survives Rejection
Debtors should carefully consider the impact of these contingencies in evaluating whether noncompete clauses survive rejection. Stepping back, companies should also review how they use noncompetes and explore other methods of safeguarding confidential data, intellectual property and trade secrets.
September 16, 2024 at 08:01 AM
8 minute read
Special Sections
Noncompete agreements, set to be relegated to history as of this month, remain relevant for now in an increasingly complex environment for companies evaluating how to treat such agreements in a restructuring scenario. In addition to the outcome of a likely appeal of a Texas federal court's Aug. 20 nationwide injunction staying the effectiveness of a new federal rule banning such agreements, companies contemplating Chapter 11 must now grapple with a decision from the U.S. Bankruptcy Court for the Eastern District of Michigan which addresses, in a novel way, the enforceability of noncompete agreements under Section 365. Coupled with the now-stayed FTC rule on noncompete agreements, this decision raises challenging questions regarding the treatment of executory contracts and noncompetes going forward.
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