Implications of Failure to Timely File Corporate Transparency Act BOI Report
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Publishers Sue AI Giant: What It Means for the Industry.
The recent lawsuit filed by publishers against a major AI company has sparked a lively debate about the future of content creation and intellectual property. As technology continues to evolve, traditional publishing is facing challenges that could reshape the industry as we know it. At the heart of the lawsuit are concerns over copyright infringement.
Many publishers argue that AI systems use their content without permission, undermining their business models. This raises important questions: How should we protect original works in a world where AI can generate content at lightning speed? And what are the economic implications for publishers who rely on their intellectual property for revenue? This lawsuit could lead to significant changes in how publishers approach licensing.
image: iStock
We might see new agreements tailored specifically for AI usage, or perhaps stricter regulations that require transparency in how AI systems train on existing works. As publishers navigate this new landscape, they may also explore innovative business models that embrace AI while safeguarding their content. The ramifications of this lawsuit extend beyond publishers to content creators themselves—authors, journalists, and freelance writers. If AI companies are forced to pay for the content they use, this could lead to better compensation for creators. However, there’s also the risk that tighter controls on content might stifle creativity and collaboration in the industry.
This lawsuit isn’t just a flash in the pan; it reflects a broader struggle faced by many industries grappling with the rapid advancement of AI. From music to film, creative sectors must find ways to balance innovation with the protection of their intellectual property. As we watch this legal battle unfold, it’s clear that the relationship between traditional publishing and AI is at a critical juncture. The outcome could set a precedent for how we navigate copyright in the digital age. For now, both sides will need to consider how to foster creativity while ensuring that original works are respected and protected.
Crystal McBride, Attorney, BridgehouseLaw LLP, Charlotte
UPDATE: FTC Non-Compete Rule
In our previous post from July 2024, we informed our clients about the FTC’s impending ban on non-compete agreements, which was scheduled to take effect on September 4, 2024. Since then, a significant legal development has halted the rule from going into effect.
On August 20, 2024, the U.S. District Court for the Northern District of Texas ruled in Ryan, LLC v. FTC that the FTC lacked the statutory authority to implement this nationwide ban. This ruling has stopped the FTC from enforcing the non-compete rule, which would have required employers to invalidate most existing agreements and notify workers accordingly. The FTC now has until October 19, 2024, to appeal this decision, and it is currently considering its options.
At BridgehouseLaw https://bridgehouse.law, we are closely monitoring this evolving situation. While the future of the FTC’s rule remains uncertain, businesses need to stay aware of ongoing legal proceedings and state-specific non-compete regulations. Should the FTC choose to appeal or other rulings emerge, we will provide further updates to ensure that our clients remain compliant and informed.
Stay tuned for more updates as we continue to track this case. If you have any questions about how this ruling may potentially impact your current agreements or would like to assess your existing contracts under state laws, please reach out to our team. We are here to assist you every step of the way.
A Journey to Citizenship: Henriette Morton’s Story
Dulles International Airport, July 29, 1999—the heat was relentless. Henriette Morton had just touched down for what was supposed to be a one-year internship at a hotel in Raleigh, NC. Her plan was simple: complete the internship, return to Germany, and start the next chapter of her life. But as life often does, it took her on an unexpected adventure.
After a whirlwind romance, Henriette found herself in Las Vegas, NV, where she married. Soon after, the couple welcomed their first child, and Henriette began the process of applying for her Green Card. Things were moving along until the unimaginable happened—9/11 shook the world, and suddenly, her immigration file vanished in the bureaucracy of the INS (now USCIS). At that time, everything was still paper-based, and it felt like her future in the U.S. hung in the balance.
After months of frustration and dead ends, her husband reached out to their congressman. Six months later, Henriette’s Green Card was finally in hand. Life resumed. She worked, traveled, and even welcomed another addition to their family. Her career eventually led her to BridgehouseLaw, where she worked closely with Attorney Reinhard von Hennigs.
One day, Reinhard asked: "Do you ever plan on becoming a U.S. citizen?"
Henriette hadn’t seriously considered it. As a German national, she knew obtaining a Beibehaltung (dual citizenship retention) permit would be difficult. The rules were strict, and she didn’t feel she had a strong case for it—after all, she hadn't faced significant discrimination or compelling reasons to apply. Plus, she had been working on similar cases for clients, so the process seemed daunting. However, Reinhard suggested waiting until she had held her Green Card for 20 years, at which point she could apply based on "gesteigertes Einbürgerungsbedürfnis" (increased need for naturalization).
Then, a change in German law opened a new path for her. With renewed optimism, Henriette decided to pursue U.S. citizenship.
Attorney Crystal McBride dove into research, finding the newly launched online submission process for naturalization (N-400). She guided Henriette through the preparation, ensuring everything was in order. The process moved faster than Henriette had anticipated. Before she knew it, she received her receipt notice, began studying for the citizenship exam, and soon passed with flying colors.
The moment she had been working toward for years arrived—the Oath Ceremony. On September 20, 2024, in Charlotte, North Carolina, Henriette proudly became a U.S. citizen. It was a surreal moment of pride, especially knowing that her American-born children now shared the same citizenship as their mother.
Her journey, though long and filled with challenges, is a testament to perseverance, patience, and the unwavering belief in building a future in a country that she now calls home.
Dathan D'Agostino, BridgehouseLaw LLP
NIL Licensing for College Athletes Brings a Revival in the Video Game Industry
In what has been deemed the “most anticipated sports video game in American history”, EA Sports College Football 25 made history when it premiered on July 19th, 2024. Although EA Sports has been making college-sport-related video games since the 1990s, this new edition has more than just a roster update for fans’ favorite teams. For the first time, the college athletes depicted in the video game are being compensated for the use of their image – their name, image, and likeliness (NIL). This is due to new legislation that allows for college athletes to be compensated for the use of their NIL, as opposed to previous laws only allowing for professional athletes to be able to profit from their NIL.
While college athletes could not previously license out the use of their NIL, this did not stop video game companies, including EA Sports, from creating college-based football videogames with attempts at anonymity – instead of including athletes’ names in the game, players selected an athlete avatar to play based on a position on the field, and the number of the player (for example, Quarterback #10). However, college athletes quickly caught on to the fact that while these avatars were technically nameless, they shared specific qualities with the athletes themselves, including hair color, height, weight, jersey number, school of attendance, and athletic skill attributes) that made it clear that the video game companies had used everything but the athletes’ names. A UCLA college athlete led a class action lawsuit against the NCAA for profiting off of the image of athletes without compensation and won in 2014. Since then, there has been a complete stop to the use of athletes’ names in video games, disappointing gamers who appreciate the realism of playing as their favorite college athletes within a virtual college stadium.
That is until the Supreme Court announced in a unanimous decision that the NCAA refusing to allow college athletes to license their NIL violated antitrust law. With this new ruling, college athletes can profit off of their image after giving consent for that image to be used, which could prove to be incredibly lucrative. The highest-valued college athletes have NIL valuations upwards of $4.5 million, which presents unforeseen opportunities for revenue for college athletes and universities alike. However, it’s notable that while these valuations are high, EA Sports paid each athlete only $600 for the use of their NIL, in addition to a free copy of the video game (valued at $70).
While the new ruling certainly opens the door for new opportunities for college athletes to profit and for fans to engage in more realistic videogames, the uncertainties in the NIL negotiation process in determining “how much an athlete’s image is worth” are likely to remain as other video game companies begin to create their variations of interactive games. These games are likely to become more prevalent given the success of NCAA 25, bringing in over $200 million in revenue before the game was even officially released. However, with college athletes now legally able to take control of their own NIL, it seems that for now, the situation is a triple win; more opportunity for companies to create video games without the threat of legal action, more realistic gameplay for the consumers, and payment to the college athletes for the use of their NIL.
Mary-Kathryn Appanaitis, Law Clerk, BridgehouseLaw LLP, Charlotte, NC
image: EA
Federal Trade Commission Act has issued a final rule called the “Non-Compete Clause Rule”
The US Federal Trade Commission under authority granted to it under the Federal Trade Commission Act has issued a final rule called the “Non-Compete Clause Rule” effective Wednesday, September 4, 2024.
In short, this rule prohibits covered employers from entering into, enforcing, or attempting to enforce POST-EMPLOYMENT non-compete agreements with workers, with a very limited exception for certain senior executives.
Who is considered a worker?
Workers are employees, independent contractors, interns, externs, and volunteers.
Who is considered a senior executive under the rule?
A senior executive is a person who (1) is in a policy-making position with final policy-making authority (President, CEO, Officer of the Company, or equivalent position) AND (2) earns at least USD 151,164.00 annually. Current non-competes remain in effect and can be enforced for persons qualifying as senior executives.
Who is a covered employer?
All employers within the FTC’s jurisdiction except certain banks, savings and loan associations, federal credit unions, Common Carriers, Air Carriers, certain persons covered under the Packards and Stockyards Act, and Non-profit organizations.
What are your responsibilities as a covered employer?
1. Employers subject to this rule must notify all workers (current and former employees with existing non-competes) who are parties to non-compete agreements that non-compete agreements are prohibited as of September 4, 2024, and that any existing non-compete agreement cannot and will not be enforced. This notification must be in writing, either via paper, mail, email, or text. The FTC has provided guidance and language that meets the minimum verbiage requirements for the notification.
2. The mandatory required notification must be sent before Wednesday, September 4, 2024.
What else do Employers need to know?
The new rule does not invalidate any confidentiality, non-solicit, non-disparagement, or other restrictive clauses in current employment agreements.
If you have questions regarding your company’s current agreements, your current agreement, or the written notification requirement, please get in touch with BridgehouseLaw LLP at (980)219-5200. One of our attorneys will be happy to assist you.
Crystal McBridem, Attorney, BridgehouseLaw LLP, Charlotte
image: istock
NFL Rookie Superstar May Want to Know When Term Sheets Are Binding
Marvin Harrison Jr. is a former Ohio State University wide receiver who was drafted 4th overall in the 2024 NFL Draft by the Arizona Cardinals. “MHJ” is proclaimed by many to be among the greatest wide receiver prospects of all time. He earned the Biletnikoff Award this past year, awarded to the nation’s best college wide receiver. And it certainly does not hurt his stardom or merchandising potential that his father, Marvin Harrison Sr., is an NFL Hall of Fame wide receiver.
All of that to say – sports paraphernalia companies should be itching to sign MHJ to deals.
Earlier this month, May 2024, Fanatics informed the public that it wanted to do just that. However, instead of revealing lucrative and eye-popping terms, Fanatics sued MHJ and his LLC for claims including breach of contract, anticipatory repudiation, and tortious interference. The damages are likely in the range of millions of dollars.
The claims are rooted in MHJ’s alleged violation of a binding term sheet – sometimes labeled a letter of intent, agreement in principle, or memoranda of understanding. These documents outline the basic terms of an agreement and help parties streamline the completion of outstanding negotiable terms and conditions. While a term sheet, and even a “binding” term sheet, are often unenforceable agreements due to their nature of laying out terms and more so agreeing to agree, there are factors that may cause such a term sheet to become enforceable. Key considerations determinative of whether such a document is enforceable include, but are not limited to (1) whether the writing incorporates all essential terms of an agreement; and (2) whether there is offer, acceptance, consideration, intent to be bound, and all other requisite elements of a binding agreement. Term sheets will likely be non-binding where material terms are undecided or where the document expressly states a right to not be bound until a formal agreement is executed.
Fanatics is likely quite certain of its chances of success here, as Fanatics would probably prefer to avoid an ensuing, unintended narrative for future rookies to consider. Something, perhaps, along the lines of, “Don’t sign with Fanatics, they sue their players.”
The fallout of this lawsuit will likely affect how young sports stars, and perhaps many others, treat binding term sheets. Prospective signees may be further incentivized to agree in principle to only very loose and incomplete terms, firmly articulating a given terms sheet is not binding and remains subject to signing a more formal and complete agreement.
This case illustrates a lesson in factors that determine whether a term sheet may be binding, and it seems reasonable to expect a certain NFL rookie superstar to take note . . .
Cole Haaf, Attorney, BridgehouseLaw LLP, Charlotte, NC
Rideshare Drivers: Employees or Contractors?
On May 21, the California Supreme Court heard arguments that may determine the future of ridesharing in the state. Specifically, the Court is considering how rideshare drivers operating under Uber and Lyft should be compensated following the 2020 ballot measure known as Proposition 22.
The case is championed by the Service Employees International Union (SEIU) alongside four rideshare drivers who are challenging the constitutionality of Prop 22. The proposition was supported by nearly 60% of the state’s voters and effectively exempted app-based drivers from a state law that restricted the type of workers who could be classified as contractors rather than traditional employees. This is a critical distinction for workers and companies alike, as the classification determines whether a worker is entitled to overtime, benefits, minimum wage, and other protections that are not guaranteed to contractors. These considerations have dramatic effects on both the drivers’ ability to make a living and the companies’ bottom lines.
Prop 22 was heavily supported by app-based ridesharing companies who stated that without the measure, the increased compensation to drivers could make them reconsider whether they will continue operating within California. The terms of the passed proposition allow rideshare drivers to be classified as contractors, however only if the company meets certain compensation requirements. For example, the drivers must be paid at least 120% of the state’s minimum wage amount while passengers are in the car, and the drivers must also receive expense reimbursements and subsidies to pay for health insurance.
During oral arguments, the justices reminded the SEIU attorneys that the electorate and the legislature are required to share lawmaking powers under the state’s constitution. The justices further stated that if the legislature disagrees with the passing of Prop 22, lawmakers could choose to extend traditional employee benefits and protections to rideshare drivers anyway. However, lawyers from the SEIU pointed out that a provision within Prop 22 barring amendments would make this workaround difficult for lawmakers to accomplish.
California is not the only state dealing with the issue of how to classify rideshare drivers. The Minnesota legislature recently lowered the minimum wage amount that companies have to pay drivers. This decision followed threats from Uber and Lyft to stop providing services in Minneapolis after the city passed higher minimum wage requirements. Meanwhile, the Massachusetts Attorney General has initiated a lawsuit against Uber and Lyft alleging that the companies classified drivers as contractors to avoid having to abide by the state’s minimum wage and overtime laws.
Rulings from the California Supreme Court are usually issued within 90 days of oral arguments. So for now, sit back, buckle up, and consider tipping your driver!
Emiley Hatten, Law Clerk, BridgehouseLaw LLP, Charlotte
image: Freepik
New Copyright Laws Thanks to Spotify?
The music industry has always been on the frontline of change within the copyright realm. The fast-developing and ever-changing landscape has always been an issue to try and pinpoint the specific mechanism that should exist within the United States to protect this type of art. When trying to determine the protection a song receives, two different copyright points need to be included:
1. As per section 102(a)(2) of the Copyright Act, musical works, including any accompanying words that include the lyrics, melodies, and harmonies are protected by themselves. This means that anything that can be fixed in writing (notes, lyrics, etc.) is protected by this section.
2. As per section 102(a)(7) of the Copyright Act, sound recordings by themselves are protected. This means that the actual song that any person can listen to is protected in this regard. Generally speaking, the sound recordings are considered the “masters” of the songs.
To understand this more specifically, here are two examples:
1. Dolly Parton in 1973 wrote and recorded the song “I Will Always Love You”. She, here, thus has the copyright over the song composition and the song recording that she produced. In 1992, with the film The Bodyguard, Whitney Houston released a cover version of the song. The song recording of Whitney, thus, is separate from the song composition and the original recording and is protected separately.
2. Taylor Swift became the face of this separation when she started to re-record her original albums to get ownership of her recordings as she was only the owner of the songwriting portion of the songs as per the contract she signed when she was just starting. The “Taylor’s Version” albums have become massive hits for the singer and are solely owned by her.
With the development of different technologies, it has become more complicated to try and get the protection the copyright allows for these creations. Most recently, Spotify – the streaming giant – was sent a cease-and-desist letter from the National Music Publishers Association (hereinafter “NMPA”) and other songwriters’ groups over the newest video function and podcasts use of lyrics and the remix feature that enables subscribers to edit songs they like and, as a result, create a derivative work. The NMPA is accusing Spotify of copyright violations and should be paid for this type of use because they are using the lyrics – a separate copyrightable work – when using the recordings. Spotify has denied wrongdoing and has mentioned that they are a platform for licensed content and that they have a process for anyone to contact them if there is a belief that there is an unlicensed song.
This has gone a step even further as the NMPA has sent a letter to the leaders of the Judiciary Committee in the Senate and House of Representatives requesting a complete update on the Copyright Act on the topic of statutory license because according to them it “prevents private negotiations in a free market”. They mention that although the Music Modernization Act (MMA) has been very beneficial in certain updates based on the new landscape of the music business there are still changes that need to be done to protect songwriters.
It will certainly be interesting to see the position the House of Representatives and the Senate will take on this and whether there will be a new addendum to the Copyright Act in the near future.
Sources:
· https://variety.com/2024/digital/news/spotify-copyright-violation-claims-lyrics-remixes-1236003575/
· https://variety.com/2024/music/news/music-publishers-congress-overhaul-copyright-act-1236012128/
· https://www.billboard.com/business/publishing/nmpa-copyright-act-overhaul-spotify-bundling-full-letter-congress-1235687539/
· https://www.smoothradio.com/features/the-story-of/i-will-always-love-you-whitney-houston-facts-video/
· https://www.today.com/popculture/music/taylors-version-meaning-swift-rerecording-albums-rcna98513
José Portabella Villela, Abogado, BridgehouseLaw LLP, Charlotte
Embracing Compassion: BridgehouseLaw's Unlimited PTO Policy and Henriette’s Journey
Breast cancer affects millions of women worldwide, and early detection through regular mammograms is crucial for effective treatment. Henriette Morton of BridgehouseLaw recently received a breast cancer diagnosis, highlighting the importance of health screenings and compassionate workplace policies. Henriette's story, coupled with the firm's forward-thinking approach to Unlimited Paid Time Off (UPTO), underscores how supportive work environments can make a profound difference during challenging times.
Personal Experience and Diagnosis
- Can you share a bit about your journey leading up to your diagnosis and how you initially felt upon receiving the news? Since I go for yearly mammograms and never miss an appointment, getting the news was a real shock. It felt like a punch in the gut. But I've learned that I have a much larger and more supportive village than I ever realized, and that's been really grounding for me.
- How has your perspective on work-life balance changed since your diagnosis? Before my diagnosis, BridgehouseLaw always promoted a great work-life balance by offering up to 30 days of Paid Time Off, similar to what European companies have enjoyed for as long as I can remember. Now, we’ve transitioned to an even more generous Unlimited Paid Time Off system. Productivity has increased while absences have decreased. It's weird because even with this new UPTO policy, we don't feel pressured to use it. Whenever someone needs a day off or several days off, they ensure their workload is covered and just submit their requests to HR. For me, it feels like a security blanket that makes you feel warm, comfortable, and safe. I never thought this would happen to me, but now that I'm facing the dreaded "Big C," it's reassuring to know that Bridgehouse has my back during this time of healing and recovery.
Support from BridgehouseLaw
- How did BridgehouseLaw respond when you shared your diagnosis with them? I'll be honest, I was extremely nervous. Thankfully, I delivered the news with my friend and colleague, Dathan D'Agostino, who was also with me when I first got the shocking news. When I told the owner of Bridgehouse, Reinhard von Hennigs (the best boss anyone could ask for), he paused, looked down at his water glass, looked up at Dathan, then back at me, and said, "Whatever you need from us, you know that you have it. This is about you getting better, so don’t worry about work during this time. Just focus on you. This is why we now have Unlimited PTO." And just like that, I felt an enormous weight lift off my shoulders! Since that day, I've told everyone at the firm, and they've been so supportive. I'm very humbled by that.
Unlimited PTO Policy
- How has the Unlimited PTO policy impacted your ability to manage your appointments, treatment, and recovery process? There haven't been any issues with managing my appointments. I feel so lucky to work for a forward-thinking company and not one that refuses to modernize its policies, clinging to an antiquated mentality in this post-pandemic world. It's reassuring to know that at BridgehouseLaw, we're not punished when life throws a metaphorical semi-truck at us. I still can't believe how U.S. companies only offer their employees 1-2 weeks of vacation and maybe 6-12 sick days a year. And let's not even talk about maternity leave! Everyone at BridgehouseLaw feels like we've won the job lottery. We work hard, laugh harder, and—though it's not the correct phrase—we're rewarded the hardest.
- What aspects of the Unlimited PTO policy have been most beneficial to you during this time? With appointments sometimes given to me at a moment's notice, I just submit my request for time off, and it’s approved within an hour or less. It's such a well-designed system, both in terms of policy and logistics.
Work Environment and Culture
- How has the supportive environment at BridgehouseLaw affected your morale and outlook during this challenging time? I won’t lie, there have been times when I just break down and cry. No one tells me to get over it or do that elsewhere. They just encourage me to let it out, and they don’t mind that I’m in my "feels." That’s what I love about them. It’s a family, and they lift me up instead of kicking me down. They help me feel empowered to beat this—mentally, physically, and emotionally!
Advice and Insights
- What advice would you give to other employees who might be going through similar health challenges? My advice to other employees going through similar health challenges is to first and foremost prioritize your health. Don't hesitate to take the time you need for appointments, treatments, and rest. Communicate openly with your employer about your situation—they may be more supportive than you expect. Lean on your support system, whether it's family, friends, or colleagues; having people to talk to can make a big difference. Lastly, don't be afraid to express your emotions. It's okay to feel vulnerable and to ask for help. Remember, taking care of yourself is the most important thing, and everything else will follow.
- How do you think companies can better support employees dealing with serious health issues? Like BridgehouseLaw, companies can better support employees dealing with serious health issues by fostering a compassionate and flexible work environment. Implementing policies like Unlimited Paid Time Off or flexible work schedules can make a huge difference, and it’s easier to implement when you have measurable metrics such as monthly or annual billable hours in law firms, or commissions, quotas, and goals in retail. Companies need to communicate clearly that employees' health and well-being come first. Providing access to mental health resources, counseling, and support groups can also be incredibly beneficial. Additionally, creating a culture of understanding and support, where employees feel safe to share their challenges without fear of judgment or repercussions, is crucial. By prioritizing these measures, companies can help their employees navigate difficult times with more ease and confidence.
Future Outlook
- What are your hopes and goals for the future, both personally and professionally? To become a Sugar Mama! I joke, but my hopes and goals for the future, both personally and professionally, are to continue focusing on my health and well-being while also contributing meaningfully to my team at BridgehouseLaw. Personally, I hope to fully recover and embrace a lifestyle that prioritizes my physical and mental health. Professionally, I aim to leverage the support and flexibility offered by BridgehouseLaw to maintain a strong work-life balance, allowing me to be productive and innovative in my role. I also hope to advocate for policies that support employees facing health challenges, ensuring that everyone feels valued and supported, just as I have been.
- How do you see the Unlimited PTO policy shaping the work culture at BridgehouseLaw in the long term? The Unlimited PTO policy at BridgehouseLaw is shaping our work culture in incredibly positive ways and will continue to do so in the long term. This forward-thinking policy not only supports our employees' well-being but also serves as a goldmine for recruitment and retention. Talented team members are acutely aware of what other companies offer, and they pay close attention to policies and benefits. By embracing Unlimited PTO, we've seen increased productivity, reduced absenteeism, and a more engaged and satisfied workforce. We encourage other companies to shed their outdated policies and step into this exciting new world. By adopting modern, flexible policies like Unlimited PTO, companies can attract and retain top talent who value a healthy work-life balance. Sticking to antiquated policies not only hinders your ability to attract new talent but also risks losing your best employees to companies that prioritize their well-being. The future of work is about flexibility, compassion, and support—embrace it, and watch your organization thrive
by Dathan D'Agostino, Law Office Manager, BridgehouseLaw LLPCharlotte, NC
Banning Noncompetes to Drive Competition in the U.S.
On April 23, the Federal Trade Commission (FTC) in the U.S. issued a new rule after voting to ban for-profit US employers from using noncompete clauses in employment agreements.
The FTC estimates that 18% of U.S. workers, or nearly 30 million people, are bound by noncompete clauses. Noncompetes are a widespread practice and the FTC is arguing they are exploitative and stunting the American workforce. Typically, a noncompete clause lays out geographic or time restraints on an employee’s potential future role. The FTC says noncompete clauses stop workers from being able to take new jobs that pay more or start a new business. While noncompetes used to be reserved only for senior executives and powerful decision-making positions, they are now used as standard practice for roles ranging from doctors to baristas. The FTC believes this ban will lead to exponential new business formations, patent filings, and earnings increases. Their goal is to enable more mobility for workers within their field without bearing the financial cost of changing career fields or physically moving locations to avoid violating a noncompete. Proponents of this decision point to several states that have already banned noncompete clauses, most notably California which currently ranks as the world’s fifth-largest economy.
In January 2023, the FTC published a proposed rule that included 90 days to receive public commentary before voting on the rule. They received over 26,000 comments and made changes to the rule in response to the public’s feedback. The FTC reported that over 90% of the comments were in favor of the proposed ban.
Under this rule, existing noncompetes for senior executives will remain unaffected, but no new noncompetes may be entered into. Existing noncompetes for the majority of workers will become unenforceable after the rule goes into effect. However, legal challenges to this new rule will likely delay the effects of this decision. The day after this rule was announced, April 24, the U.S. Chamber of Commerce and other business lobbyist groups filed a complaint in federal court challenging the FTC’s right to issue this rule. They believe the FTC is overstepping its authority to make this determination without a legislative mandate from Congress. They have accused the FTC of undermining American businesses’ ability to protect their intellectual property and investments in training employees. The issue will likely remain unsettled for a while as legal action will take several months and the upcoming election could alter the direction of the FTC.
Kathleen Turpin, Law Clerk, BridgehouseLaw LLP Charlotte, NC
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