I wrote about the Federal Trade Commission (“FTC”) banning non-competes in April. You can read it here: FTC Bans Non-Compete Clauses – Bombard Law.
However, last month, a federal judge in Texas issued an order that found the FTC’s non-compete rule unlawful and prohibited its enforcement. The case, Ryan, LLC v. Federal Trade Commission, was brought by business groups who argued that the FTC exceeded its statutory authority in issuing the rule. The Court concluded that the FTC did not have the statutory authority to engage in substantive rulemaking regarding unfair methods of competition. Additionally, the Court found the rule arbitrary, citing its overbroad nature and lack of reasonable explanation for its scope.
However, the FTC has said it is considering an appeal. But for now, non-competes can stay.
In a Massachusetts Supreme Judicial Court (“SJC”) case, Patel v. 7-Eleven, Inc. (SJC 13485, September 5, 2024), the Court dealt with franchise owners who sued 7-Eleven because they were misclassified as independent contractors rather than employees. The SJC concluded that the three-prong test for independent contractor status applies to franchise relationships but requires a case-specific examination.
While not a groundbreaking case, it once again reinforced the 3-prong test that employers must follow when determining whether an employee is an employee rather than an independent contractor. If an employer fails to follow this test and misclassify an employee, it can result in legal action.
If you have questions about the non-competes for your employees or their status as an independent contractor/employee, please reach out.