In April of 2024, the Federal Trade Commission (FTC) issued a final rule banning non-competes throughout the United States. The ban was heralded to protect the “fundamental freedom of workers to change jobs, increasing innovation and fostering new business growth.” The commission estimated the ban could lead to the formation of new businesses and increase the number of new patents filed.
While the rule applied to nearly 30 million workers – one in five – it only represented 0.75 of workers. The rule was subjected to a 90-day public comment period with more than 26,000 comments with 1,000 comments opposing the ban. States too have their own laws which affect non-compete agreements. After the FTC ruling, many states took a closer look at their own non-compete legislation.
In April, The National Law Review covered the passage of what it deemed “employer-friendly restrictive covenant legislation” in the state of Kansas On April 8, the state enacted a law “concerning restraint of trade; relating to restrictive covenants; providing that certain restrictive covenants are not considered a restraint of trade and shall be enforceable, amending K.S.A. 2024 Supp. 50-163 (the “Kansas Law”). The blog published by The National Law Review found that per the Kansas Law, Kansas’s “restraint of trade act shall not be construed to apply to any franchise agreements or covenants not to compete.” Because the Kansas Law sets forth requirements for non-solicit provisions, it does not place requirements or restrictions on the use of non-competes, according to the blog.
The writer summarized that the “freedom to contract” and “wide discretion” for parties entered into employment agreements “extends to restrictive covenants in employment contracts. Under Kansas Law, “non-compete agreements are ‘valid and enforceable if the restraint on competition is reasonable under the circumstances and not adverse to the public welfare.” Id. at 370 (quoting Weber v. Tillman, 913 P. 2d 84 (Kan. 1996)).
It is important that employers in Kansas remain well-versed in the nuances of the Kansas Law and that employees non-solicits be in writing. The Kansas Law authorizes courts to change overbroad restrictive covenants, further showing the intention of the legislature that restrictive covenants will be fully enforced as allowed by law.
The writer from The National Law Review says an expectation that other states will also continue to create or support legislation that will restrict non-competes. Wyoming recently passed such a law and there is pending legislation in Texas and New York. Further posts from The National Law Review will be forthcoming but the writer stressed the importance of employers reviewing any restrictive covenants to ensure they follow applicable law.
