Current Status of the FTC’s Non-Compete Rule and an Overview of Non-Compete Agreements in Indiana, Kentucky, and Ohio.
The purpose of this article is to provide an update as to (1) the current status of the FTC’s Non-Compete Rule and the effect of a district court’s recent order on employers and business relations nationwide as well as (2) an overview of non-compete agreements in Indiana, Kentucky, and Ohio.
The FTC’s Non-Compete Rule Held Unenforceable: A District Court’s Final Judgment
In our May 7, 2024 article, attorney Sarah Brown discussed the near comprehensive ban on non-compete agreements issued by the Federal Trade Commission (“FTC”) on April 23, 2024 in its final Non-Compete Clause Rule (“Non-Compete Rule”). The Non-Compete Rule was set to take effect on September 4, 2024. However, litigation halted the implementation of the Non-Compete Rule.
On August 20, 2024, in Ryan LLC, et al. v. Federal Trade Commission, No. 24-cv-986 (N.D. Tex.), United States District Judge Ada Brown handed down an order with nationwide effect, setting aside the Non-Compete Rule. It was the opinion of Judge Brown that the FTC lacks statutory authority to promulgate the Non-Compete Rule, and she further deemed the Non-Compete Rule arbitrary and capricious. According to the district court’s order, the Non-Compete Rule shall not be enforced or otherwise take effect on September 4, 2024 or thereafter. The FTC then appealed the district court’s order to the United States Court of Appeals for the Fifth Circuit.
However, given the recent shift from the Biden administration to the Trump administration, the FTC’s appeal currently sits in abeyance following an unopposed motion filed by the government on March 7, 2025. This motion is premised on a public statement by current FTC Chairman Andrew Ferguson taking the position that the FTC may need to consider whether to continue defending the Non-Compete Rule. The abeyance will be in effect until on or about July 12, 2025, at which point the government is expected to provide an update to the court. Unless and until the court of appeals orders otherwise, the district court’s order setting aside the Non-Compete Rule will remain in effect nationwide.
Aside from the ongoing litigation at the federal level, employers are still required to comply with state laws and regulations when utilizing non-compete agreements.
Non-Compete Agreements in Indiana and Kentucky
In both Indiana and Kentucky, the general rule is that a non-compete agreement is enforceable if it is reasonable in duration, geographic scope, and purpose and aligns with public interest. The terms of an unenforceable non-compete agreement, however, may be removed or modified by a court to become enforceable so long as such alteration does not change the parties’ original intent in entering into the agreement. Furthermore, in both of these states, continued employment alone is not sufficient consideration to support upholding a non-compete agreement. Thus, an employee must receive something of value in exchange for entering into a non-compete agreement with his employer (e.g., a promotion).
Despite the general rule, both Indiana and Kentucky have adopted industry-specific limitations to non-compete agreements. For example, in certain situations, non-compete agreements entered into after July 1, 2023 are not enforceable in Indiana between an employer and a physician. Additionally, Kentucky has adopted limitations applicable to industries such as health care services agencies and professional employer organizations.
Non-Compete Agreements in Ohio
Currently, a non-compete agreement in Ohio is generally enforceable so long as its terms are reasonable (e.g., no greater than necessary to protect the employer’s legitimate business interests, does not cause undue hardship to the former employee, is not harmful to the public interest, etc.). Ohio courts consider a variety of factors in determining an agreement’s reasonableness and may modify an unreasonable agreement so that it becomes reasonable and thus enforceable. Unlike Indiana and Kentucky, Ohio law recognizes continuing employment as sufficient consideration to entering into a non-compete agreement.
Notably however, last month the Ohio Senate introduced Senate Bill No. 11, an attempt to ban non-compete agreements in Ohio. If passed, Senate Bill No. 11 would (1) prohibit an employer from enforcing a non-compete agreement after the conclusion of the relationship between the employer and worker and (2) prohibit an employer from requiring, as a condition of employment, a worker who primarily resides and does business in Ohio to agree to a forum selection clause outside of Ohio unless the employer is individually represented by an attorney in negotiating the terms of the agreement. However, unless and until Senate Bill No. 11 is signed into law, reasonable non-compete agreements remain enforceable in Ohio.
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If you have any questions regarding how you or your business may be affected by a non-compete agreement, please contact one of our attorneys.