Key Highlights End of nationwide ban efforts: The FTC has officially moved to dismiss its appeals and voted to vacate its proposed nationwide non-compete ban, signaling the end of its push for a universal prohibition. Shift to targeted enforcement: While dropping the broad ban, the FTC remains committed to scrutinizing non-competes on a case-by-case basis, particularly in industries like healthcare and staffing where such agreements are prevalent. Immediate employer impact: On Sept. 10, 2025, the FTC sent letters to large healthcare and staffing employers urging a review of non-competes and restrictive agreements, indicating an enforcement focus in those sectors, alongside a broader public inquiry open until Nov. 3, 2025. Guidance for compliance: Commissioner Meador outlined key factors that the FTC will consider when assessing non-competes, including wage and skill level, scope and duration, less restrictive alternatives and market power — making it essential for employers to review and refine their covenants to align with federal scrutiny and evolving state laws. On Sept. 5, 2025, the FTC moved to dismiss its appeals of injunctions blocking the enforcement of the non-compete ban it sought to implement nationwide last year. That same day, the FTC voted 3-1 to take steps to vacate the ban. These moves mark the end of the FTC’s efforts to implement a universal ban on non-competes, following a change in administration and FTC leadership. However, recent FTC actions suggest the agency remains focused on non-compete agreements, especially in the healthcare and staffing industries. Renewed scrutiny: Rather than pursuing a blanket ban, the FTC is pivoting to case-by-case enforcement and targeting covenants that it views as unfair or anticompetitive. On Sept. 10, 2025, the FTC sent letters to several large healthcare employers and staffing firms urging them to conduct a comprehensive review of their employment agreements — including any non-competes or other restrictive agreements — to ensure they are appropriately tailored and comply with the law. These letters suggest the FTC intends to initially direct its scrutiny of non-competes to the healthcare and staffing industries The FTC’s move parallels state-level action in places like Colorado, Texas and Pennsylvania, which have adopted stricter limits on non-competes in health care, as previously reported by Polsinelli. In addition, the FTC has also launched a public inquiry — open until Nov. 3, 2025 — through which the public may submit information that may be used to inform future enforcement actions. Importantly, this public inquiry is not limited to the healthcare or staffing industries, meaning the FTC’s scrutiny may expand to other sectors. FTC provides roadmap to enforcement priority: In announcing the FTC’s intent to revoke the non-compete ban, Commission Meador issued a statement identifying several contextual and legal factors to help evaluate non-compete provisions: Employee wage and skill level; Deployment in a distribution network (for example, non-competes in the franchise context); Independent contractors; Likelihood of free riding (employer investments in training, employee access to confidential information); Availability of less restrictive alternative; Scope and duration; Market power; and Evidence of economic effects. Impact on current non-competes: Employers should carefully review their non-compete covenants to ensure they are carefully drafted and aligned with both federal and state law. The FTC has made it clear that enforcement is coming — just not through a single sweeping rule. Additionally, in light of the factors from Commissioner Meador, employers should consider their overall non-compete strategy, including which workers are required to enter non-competes and whether alternative tools are available to protect their business interests. Please contact your Polsinelli attorney for help reviewing or updating your agreements and broader non-compete strategy.    

Sweeping changes to noncompete covenants are set to take effect on September 1, 2025, for health care employers in Texas. These changes stem from recent amendments to Texas’ noncompete statute. These changes will: Expand Texas’ heightened enforceability requirements to nearly all health care practitioners. Impose strict limits on the duration and geographic area of applicable noncompete covenants. Cap the buyout option that must be provided to covered health care practitioners. Who Is Impacted? The recent amendments to Texas’ noncompete statute were enacted through Texas Senate Bill 1318 (SB 1318) that was signed into law by Governor Abbott on June 20, 2025. It will impact Texas-licensed physicians, dentists, nurses (including advanced practice nurses), physician assistants, and health care entities that execute noncompete covenants with the aforementioned health care practitioners. Downstream, these amendments have the potential to alter various health care business models, and the value assigned to health care entities in mergers and acquisitions. What Are the Key Changes? Since 1999, the Texas noncompete statute has imposed heightened requirements for securing enforceable covenants with physicians licensed by the Texas Medical Board. SB 1318 takes these protections a step further by incorporating the following heightened requirements: Mandatory/Salary-Capped Buyout Options – Similar to physicians, mandatory buyout clauses must now be integrated into noncompete covenants with dentists, nurses and physician assistants. The amendments eliminate the statute’s open-ended “reasonable price” requirement and will now require buyout clauses to not exceed a covered individual’s “total annual salary and wages at the time of termination.” For many agreements, this will result in a significant reduction from previous buyout clauses. One-Year Duration – Noncompete covenants that are executed with physicians and other health care practitioners will be limited to one (1) year following the termination of the covered individual’s contract or employment. Five-Mile Radius – The geographic area of noncompete covenants that are executed with physicians and other health care practitioners will now be limited to “a five-mile radius from the location at which the health care practitioner primarily practiced before the contract or employment terminated.” Termination Without “Good Cause” for Physicians – The circumstances of a physician’s termination will impact the enforceability of their noncompete covenant. Noncompete covenants will be void and unenforceable against a physician if they are involuntarily terminated without “good cause,” which is defined as “a reasonable basis for discharge . . . that is directly related to the physician’s conduct, including the physician’s conduct on the job, job performance and contract or employment record.” Importantly, this distinction is limited to physicians. The enforceability of noncompete covenants that are executed with other health care providers will not be impacted by the circumstances of their termination. Clear and Conspicuous Language – Noncompete covenants that are executed with physicians and other health care practitioners must now “have terms and conditions clearly and conspicuously stated in writing.” SB 1318 does not expand further on this requirement, but it will result in noncompete covenants being susceptible to attack on this basis. Managerial/Administrative Carve-Out – Before the enactment of SB 1318, Texas’ heightened enforceability requirements extended to most physician-entered noncompete covenants “related to the practice of medicine” (excluding certain business ownership interests). This created some ambiguity regarding when these heightened requirements were triggered. SB 1318 partially resolves this by emphasizing “the practice of medicine does not include managing or directing medical services in an administrative capacity for a medical practice or other health care provider.” Stated differently, noncompete covenants that are executed with physicians employed solely in a managerial or administrative capacity will not be subject to these heighted requirements. When Do These Changes Go into Effect? The changes go into effect on September 1, 2025. Importantly, these changes are prospective in nature and only apply to noncompete covenants that are entered into or renewed on or after this date—meaning that preexisting noncompete covenants will continue to be governed by Texas’ noncompete laws existing before the effective date of SB 1318. What’s Next? These amendments are consistent with the nationwide trend towards more restrictions on the permissive use of noncompete covenants. While these amendments are not retroactive, it is conceivable that judges may still take these amendments into consideration when analyzing the enforceability of preexisting covenants in future litigation under Texas’ current “no greater than necessary” standard. In turn, employers will need to weigh whether they make these changes on a rolling basis or preemptively amend existing agreements and consider other avenues for protection. Polsinelli attorneys are available to assist covered health care entities in navigating these changes and ensuring that their protectable business interests are adequately safeguarded.

This past week, the FTC appealed a Texas federal court’s August ruling that blocked nationwide enforcement of the non-compete ban. The non-compete ban will remain blocked during the pendency of the appeal process. However, the outcome of the appeal will determine: (1) whether the non-compete ban remains blocked; and (2) the future scope of the FTC’s regulatory authority. There are three court challenges to the non-compete ban. The status of those challenges (including appeals) is detailed below: Ryan v. The Federal Trade Commission: On October 18, 2024, the FTC filed a Notice of Appeal to challenge a Texas federal court’s seminal ruling, which held the non-compete ban unlawful and blocked—nationwide—the FTC’s non-compete ban from taking effect on September 4, 2024. Pending the appeal, the non-compete ban remains enjoined. The rule will now be considered by the Fifth Circuit. It is likely the issue will be appealed to the U.S. Supreme Court for review. Properties of the Villages, Inc. v. Federal Trade Commission: In August 2024, a Florida federal court entered a limited injunction prohibiting enforcement of the non-compete ban against the named plaintiff. In late September 2024, the FTC filed a Notice of Appeal. The rule will now be considered by the Eleventh Circuit. If there is a circuit split in the U.S. Courts of Appeals, that could create uncertainty in the business community. A circuit split on an issue of national importance, such as this, would also increase the high probability that the U.S. Supreme Court would entertain an appeal and weigh in itself. ATS Tree Services, LLC v. Federal Trade Commission: As the appeals of the Ryan and Villages cases progress, one challenge to the non-compete ban will not be moving forward. In July 2024, a Pennsylvania federal court upheld the legality of the FTC’s non-compete ban. Following that ruling, the Court refused to issue a stay pending the appeal in Villages and the then-anticipated Ryan appeal, prompting the plaintiff to abandon its challenge to the non-compete ban and dismiss the case. Evaluating the potential impact of FTC leadership change: Another consideration for the non-compete ban’s legal battle is the fate of FTC Chair Lina Khan’s tenure. Her three-year term expired in late September, but she may remain on the job as acting chair until or if she’s replaced. Depending on the outcome of the Presidential and Congressional elections, the FTC could come under new leadership at which time the non-compete ban could be rescinded and/or the appeals dropped. What comes next? As the appeal process unfolds, the non-compete ban remains blocked vis-à-vis the Ryan court’s ruling. Polsinelli attorneys will continue to monitor the status of the appeals.

Yesterday, Judge Ada E. Brown of the U.S. District Court for the Northern District of Texas in Ryan v. The Federal Trade Commission upheld a challenge by business groups to the FTC’s non-compete ban. In addition to confirming her earlier ruling that the FTC non-compete ban was not a valid exercise of agency power, the judge also expanded the limited, temporary injunction entered on July 3, 2024 to hold unlawful and set aside the noncompete-ban in a ruling with a “nationwide effect” that is not limited to the parties in the lawsuit. In other words, the FTC’s non-compete ban will not take effect on September 4 for anyone. The Court concluded that: (1) the FTC lacked statutory authority to promulgate substantive rules concerning unfair methods of competition, i.e. the non-compete ban; and (2) the non-compete ban is arbitrary and capricious because it is “unreasonably overbroad without a reasonable explanation.” As a result, the Court found the non-compete ban to be an unlawful agency action. In deciding the appropriate relief, the Court relied on recent precedent from the Fifth Circuit to conclude its ruling must have a “‘nationwide effect,’ is ‘not party-restricted,’ and ‘affects persons in all judicial districts equally.’” Thus, the Court’s ruling prevents (1) the FTC from taking any action to enforce the non-compete ban against anyone; and (2) the FTC non-compete ban from taking effect on September 4, 2024—effectively vacating it. What happens next? In the wake of the ruling, the FTC’s spokesperson stated, “[The FTC is] seriously considering a potential appeal.” If the FTC decides to appeal, the decision would be reviewed by the U.S. Court of Appeals for the Fifth Circuit in New Orleans. Any decision rendered by the Fifth Circuit would likely be appealed to the U.S. Supreme Court—meaning the final fate of the FTC’s non-compete will be revisited and could change. Importantly, even though the FTC non-compete ban will likely not go into effect in the immediate future, the FTC still has the power in the interim under Section 5 of the FTC Act to pursue enforcement actions on a case-by-case basis. In reacting to the ruling, an FTC spokesperson stated, “Today’s decision does not prevent the FTC from addressing noncompetes through case-by-case enforcement actions.” If the FTC is to be taken at its word, it appears ready to amplify such enforcement actions in the future. The FTC’s posture could change after the November election depending upon the policies of the next administration. How should employers approach non-competes? Notwithstanding yesterday’s ruling, employers should still be mindful of the enforceability of their non-competes now and in the future. Several states have limited or outright banned the use of non-competes. The move by the FTC could spark additional state legislatures to revisit state-level restrictions as they return from recess and begin new legislative sessions this Fall. The U.S. Congress could also decide to enact legislation of its own; and, it’s conceivable that yesterday’s ruling will serve as a catalyst for Congress to revisit such legislation. Polsinelli attorneys are continually monitoring the evolving landscape of restrictive covenant law and are available to help you evaluate your use of non-competes and other restrictive covenants to protect competitive information.

Yesterday (July 23), a Pennsylvania judge—in ATS Tree Services, LLC v. Federal Trade Commission—upheld the legality of the FTC's non-compete ban. This ruling contradicts the ruling recently issued in a parallel proceeding in Texas. Earlier this month, a Texas judge—in Ryan, LLC v. Federal Trade Commission—temporarily enjoined the FTC’s non-compete ban from going into effect against the named plaintiff/intervenors. Although the Texas judge declined to implement a nationwide injunction, she signaled an intent to uphold the challenge to the non-compete ban in a future ruling based on her finding that the FTC had likely exceeded its statutory authority and a categorical ban on non-competes would be arbitrary and capricious.  The ruling sides with the FTC, creating a divide in the judiciary on the scope of the FTC's regulatory powers and the legality of the FTC’s upcoming non-compete ban (scheduled to take effect on September 4). While the Court’s ruling partially denied a preliminary injunction based on a finding of no irreparable harm, the crux of the opinion held that plaintiff was unlikely to succeed in establishing that the FTC’s non-compete ban is unlawful. In so finding, the judge endorsed the FTC’s interpretation of its procedural and substantive rulemaking authority and concluded that the FTC has the authority to promulgate a rule that effectively bans non-competes nationwide. What comes next? While the Pennsylvania judge's decision provides a lifeline to the quickly approaching non-compete ban, the FTC's win may be short-lived. By August 30, the Texas judge intends to rule on the ultimate merits of the challenge to the non-compete ban, at which time she could issue more expansive, nationwide relief. Additionally, briefing is underway in a third challenge to the non-compete ban filed in Florida (Villages, Inc. v. Federal Trade Commission). It is expected that yesterday’s developments could spur additional legal challenges by employers. We will continue to monitor and report new developments.   What should employers do now? Given the uncertainty of whether the FTC’s non-compete band will go into effect on September 4, employers should consult with counsel about their options and the appropriate steps and contingencies to explore in the interim.

On July 3, a Texas judge in the bellwether lawsuit, Ryan, LLC v. The Federal Trade Commission, became the first to weigh in on the legality of the FTC’s non-compete ban that is set to take effect on September 4. As was widely anticipated, the Court concluded that a preliminary injunction was appropriate, and it temporarily enjoined the non-compete ban from going into effect against the named plaintiff/intervenors to the Ryan lawsuit. Less anticipated, the Court declined to issue a nationwide injunction to non-parties—meaning that the FTC’s non-compete ban currently remains set to take effect on September 4 for all employers who are not named parties in the Ryan lawsuit. In reaching its conclusion, the Court held that the FTC’s rule banning most non-competes is likely unlawful for two reasons: (1) the FTC likely exceeded its statutory authority because it does not have substantive rulemaking authority to craft rules regarding unfair methods of competition; and (2) a categorial ban on nearly all non-competes would likely be arbitrary and capricious because it is overly broad without any reasonable explanation. While these findings are a clear rebuke of the FTC’s actions, the Court expressed doubt about whether it would be appropriate for it to issue a nationwide injunction that would extend to non-parties because such relief is unnecessary to protect the interests of the named parties (which is the focus at the preliminary injunction stage). The implications of this ruling are going to evolve over the next two months. The Court has ordered the parties to submit a joint status report by July 9 to determine the case’s next steps, and it has committed to issuing a final decision on the merits of the entire lawsuit by August 30. This forthcoming merits-based decision could result in a more expansive nationwide injunction that would extend to non-parties; however, many employers may view this as providing little reprieve in the interim because of the anticipated rulings timing with the looming September 4 effective date and actions needed to prepare for that effective date. For now, employers will need to revisit how they intend to approach the FTC’s Final Rule in the days leading up to September 4. Attention will also likely shift to the parallel lawsuit in Pennsylvania, ATS Tree Services, LLC v. The Federal Trade Commission, which leaves open the possibility of a nationwide injunction still being issued by that Court later this month.

Yesterday (May 29), in Ryan, LLC et al. v. The Federal Trade Commission, the FTC filed its response in opposition to Plaintiffs’ request to stay/enjoin the FTC Rule banning non-competes from taking effect on September 4. The Court has committed to issuing a decision on Plaintiffs’ request no later than July 3. Consistent with commentary to the Rule, the main thrust of the FTC’s response argues it has authority to issue the Rule pursuant to the Federal Trade Commission Act’s directive that Congress “empowered and directed” the FTC to prevent the use of unfair methods of competition through rulemaking. The FTC also devotes significant briefing to dispelling the application of the “major questions doctrine” to curtail its regulatory ability. We anticipate the Court’s decision will most likely hinge on whether the Court applies the major questions doctrine – articulated in the U.S. Supreme Court’s 2022 decision in West Virginia v. Environmental Protection Agency – to grant a nationwide injunction enjoining the Rule. In the West Virginia decision, the Supreme Court found the EPA’s policy involved a “major question” and that the agency went too far in its attempt to regulate absent explicit permission from Congress to do so. The U.S. Court of Appeals for the Fifth Circuit employed that same rationale to affirm a preliminary injunction blocking enforcement of President Biden’s COVID-19 federal contractor vaccine mandate. The Fifth Circuit’s decision likely drove the filing of the two lawsuits challenging the Rule in Texas federal courts, which sit in the Fifth Circuit. Plaintiffs' reply briefs are due June 12. Your Polsinelli Restrictive Covenant and Trade Secret Group will continue to monitor these cases and will keep you updated with any major litigation developments.

On April 23, 2024, the Federal Trade Commission (“FTC”) conducted a special Open Commission Meeting to vote on a Final Rule (the “Rule”) banning most non-compete clauses as an “unfair method of competition.” By a vote of 3-2, the Rule was approved for publication in the Federal Register. The Rule becomes effective 120 Days from Publication in the Federal Register (the “Effective Date”). Here is what you need to know: What clauses are impacted by the Rule? The Rule defines a prohibited “non-compete clause” to include any contract term, workplace policy, or term or condition of employment, written or oral, that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from seeking work, accepting work, or operating a business after prior employment ends. Other types of post-employment covenants (e.g., non-solicitation) could be attacked under the Rule if they have the effect of a non-compete. What employers and workers are impacted by the Rule? Generally, the Rule will impact all employers other than certain banks, savings and loan companies, non-profits, and common carriers, which are not subject to the FTC’s authority by law. The Rule applies to paid and unpaid workers, including employees, independent contractors, externs, interns, volunteers, apprentices, and sole proprietors. The Rule does not apply to the franchisee in a franchisor relationship. What conduct is prohibited by the Rule? The Rule prohibits employers from (1) entering into or attempting to enter into a non-compete clause, (2) enforcing or attempting to enforce a non-compete clause, and (3) representing that a worker is subject to a non-compete clause. The Rule applies to non-compete clauses entered before the Effective Date unless the non-compete clause is with a “Senior Executive”. The exception for “Senior Executives”: Unlike the proposed rule, the final version of the Rule provides an exception for non-compete clauses entered into with Senior Executives before the Effective Date. A Senior Executive means a worker receiving total annual compensation (excluding fringe benefits) of at least $151,164 in the preceding year, and was “in a policy-making position”—meaning the entity’s president, CEO, officer, or other person who has final authority to make policy decisions that control significant aspects of the entity (and not just a subsidiary or affiliate). The exception for “bona fide sales of business”: The Rule does not apply to non-compete clauses entered into “pursuant to a bona fide sale of a business entity, of the person’s ownership interest in a business entity, or of all or substantially all of a business entity’s operating assets.” The Rule does not limit this exception to only those holding at least 25% ownership interest in a business, like the proposed rule did. What does the Rule require employers to do now? On or before the Effective Date (unless the Rule is enjoined), employers are required to provide all workers with impacted non-compete clauses clear and conspicuous notice to the worker that the non-compete clause will not be, and cannot be, legally enforced against the worker. The notice must be provided in writing by hand deliver, mail, email or text message, and group communications are permissible. The Rule provides model notice language. What happens to existing lawsuits? The Rule does not apply to causes of action related to non-compete clauses that have accrued prior to the Effective Date. Put another way, the Rule likely will not change cases involving alleged violations of non-compete clauses occurring before the Effective Date. What do we expect next? Lawsuits challenging the Rule were filed within hours of the vote, including a lawsuit filed in the United States District Court for the Eastern District of Texas by the U.S. Chamber of Commerce. Given the scope of the Rule and its impact, it is anticipated that at least some courts will enjoin the Rule from taking effect until the U.S. Supreme Court has an opportunity to weigh in on the Rule’s validity and constitutionality. Is there still risk when hiring a competitor’s employees? Yes. The Rule does not take effect for months and may never take effect if the court challenges are successful. The Rule also does not apply to conduct occurring before the Effective Date, so actions taken now still have risk. More importantly, the Rule generally does not eliminate all risk to hiring employees from a competitor because even without non-compete clauses, employers can bring suit based on other contract terms (non-solicitation and non-disclosure clauses), trade secrets, and legal theories to protect their interests when former employees go to work for a competitors. Contact your Polsinelli attorney if you need guidance reviewing your non-compete agreements or strategy around restrictive covenants.

On January 9, 2024, Shareholders in our Restrictive Covenant and Trade Secret Practice Group conducted a webinar covering “What Employers Need to Know About Non-Competes in 2024.” A recording of that webinar is available here. Below, the Team addresses some of the additional questions concerning the status of the FTC Proposed Rule, anticipated challenges to the Proposed Rule, FTC Lawsuits Against Employers for Imposing Non-Competes, Exceptions to Non-Compete Bans, Employee “Theft,” and Hiring Employees Subject to Non-Competes that were posed during the webinar. 1. The Status of the FTC Proposed Rule Banning Non-Competes The comment period ended on April 19, 2023, and we are now waiting on the FTC to issue a Final Rule. There is no deadline for the FTC to issue a Final Rule, though the general consensus is that the FTC will issue a Final Rule in April 2024. No one knows with certainty what the Final Rule will say, and the FTC is not restricted by the proposed rule or comments. It can adopt the proposed rule as is, modify, or even implement an entirely different rule without any additional rulemaking process. The FTC’s advocacy for a full ban since the comment period closed suggests it does not intend to change course, and employers would be wise to prepare for a Final Rule substantially similar to the proposed one. 2. Anticipated Challenges to the FTC Final Rule Regardless of what the Final Rule looks like, it will be immediately challenged in court (similar to the vaccine mandate challenges), with the Final Rule taking effect unless and until it is enjoined. The prevailing opinion is that there are very strong arguments to attack the FTC’s authority to issue the rule, primarily that the FTC exceeded its rule-making authority. Regardless of the ultimate success of the legal challenges, it will still generate uncertainty in the interim and give rise to public policy arguments against enforcement in current disputes (which some judges may find persuasive). Moreover, the rulemaking effort is merely another example of growing hostility towards non-compete covenants, and we will likely see Congress and states, including New York, revisit this issue. 3. FTC Lawsuits Against Employers for Imposing Non-Competes During 2023, even without the authority of a Final Rule, the FTC filed three complaints against employers over their use of non-competes. The claims alleged the employers imposed non-competes on employees in an unfair manner that tended to harm competition, consumers, and workers, thus violating antitrust laws. The Complaints were unrelated to any enforcement efforts by the employers at issue, but the FTC argued that the noncompetition agreements at issue had the effect of prohibiting workers in the affected industries from earning higher wages and were therefore unfair labor practices. This ties into the cooperation agreements entered into between the FTC, the NLRA and DOL in 2023, which make it more likely that employers’ non-competes may come under scrutiny as a result of an unrelated audit or investigation. 4. Exceptions to Non-Compete Bans in the Proposed Final Rule The FTC Proposed Rule is very broad and applies to all kinds of paid and unpaid workers, while some state laws are more narrow (bans for employees only) or are less clear in whether they are intended to apply to other categories of workers beyond employees. Similarly, the FTC Proposed Rule did not contain a carve out for highly compensated workers. Other state laws, like Illinois, Colorado, Maryland, Maine, Nevada, Oregon, Rhode Island, Virginia, Washington and Washington D.C., allow for non-competes if an employee makes above a certain salary threshold. It is best practice to evaluate each case based on its facts and review the applicable law, since there is no one-size-fits-all approach to non-compete guidance at this time. 5. Employee “Theft” Most of the laws voiding non-competes do not impact the enforceability of non-solicitation clauses, though some do (e.g., Colorado and Illinois). However, with the federal government’s recent focus on antitrust, non-solicitation clauses purporting to prohibit the hiring of employees by a competitor or business partner may come under closer scrutiny. Employers should be wary of any agreement that could be interpreted as restricting the ability to hire employees. 6. Hiring Employees Subject to Non-Competes Even with the changes in the law, hiring employees subject to non-competes can still be risky. Generally, non-competes are not per se invalid, and lawsuits to enforce non-competes can be made even if the covenant in question is likely to ultimately be found overbroad or unenforceable. Unfortunately, the path to proving a non-compete is unenforceable in court, and arbitration is disruptive, time-consuming and expensive. Polsinelli attorneys are available to help you evaluate the facts of each particular situation on a case-by-case basis to develop a risk management strategy for hiring and retaining employees.

Texas’ Third Special Session ended on October 19, 2021 without the Texas Legislature codifying any law related to Governing Abbott’s recent Executive Order (GA-40), which prohibits entities (including private employers and businesses) from compelling COVID-19 vaccinations. Polsinelli’s summary of this Executive Order can be read here. Absent Texas’ Governor Abbott calling a Fourth Special Session, the Texas Legislature will not reconvene until January 2023—meaning the substance of the Executive Order is unlikely to become state law. The lack of any legislative movement on this issue is noteworthy because Governor Abbott had called on the Texas Legislature to take up this matter—which was introduced as Senate Bill 51 (“SB 51”)—during the Third Special Session. SB 51 was aimed at protecting certain individuals, including employees, from varying levels of vaccine mandates. In going one step further, SB 51 would have made it unlawful if an employer fails to hire, discharges, “or otherwise discriminates against an individual with respect to the compensation or the terms, conditions or privileges of employment because the individual claims an exemption” such as a medical condition or reasons of conscience, including a religious belief. While the Texas Legislature’s refusal to advance this bill does not impact the enforceability of this Executive Order (which remains in place), it does signal that the Texas Legislature does not have an appetite for codifying additional restrictions on what private businesses may mandate with their employees. Once OSHA’s forthcoming Emergency Temporary Standard is issued (which will require covered employers to mandate vaccination or weekly testing with their employees), this may change. In the interim, Polsinelli attorneys will continue to monitor and report on new vaccine mandate developments and are available to answer questions about how employers should navigate these issues.

On October 11, 2021, Governor Abbott issued Executive Order GA-40, stating that no entity in Texas (including private employers and businesses) can compel COVID-19 vaccination by any individual, including an employee or consumer who objects to such vaccination because of (1) personal conscience, (2) religious belief, or (3) medical reasons, including prior recovery from COVID-19. Entities that fail to comply with this order may be fined up to $1,000. The order expressly states that it was enacted in response to the Biden Administration. Last month, the Biden Administration implemented various vaccine mandates for certain employers, including health care facilities that receive funds from the Medicare or Medicaid reimbursement program, federal contractors, and employers with 100 or more employees (once OSHA’s forthcoming Emergency Temporary Standard is issued). In turn, there will likely soon be legal challenges to the scope of the Executive Order—including whether it is preempted by conflicting federal mandates. While the Executive Order allows non-compliant entities to be fined, the order does not expressly address any workplace protections or rights. For example, if an employee is terminated for refusal to comply with an employer’s vaccine mandate (unrelated to a religious and medical exemption), does he or she now have legal recourse? Following the issuance of this Executive Order, discharged employees may attempt to bring what is known as a Sabine Pilot claim. This public policy claim is extremely narrow in application and generally only applies in instances where an employee is terminated for the refusal to perform an illegal act that carries criminal penalties—a scenario that such employees may have difficulty establishing in this context. Additionally, the Executive Order also leaves unanswered whether an employer’s vaccination policy is unlawful in instances where employees have the option to undergo weekly testing in lieu of receiving a COVID-19 vaccine. In a similar scenario, some commercial operators (e.g., concert venues) have sought to avoid Texas’ prohibition on requiring consumers to show proof of a COVID-19 vaccination, by allowing consumers the option to instead produce a negative COVID-19 test. Polsinelli attorneys will continue to monitor and report on new vaccine mandate developments and are available to answer questions about how employers should navigate these issues.

Over the weekend, the U.S. Southern District of Texas issued an order that provides employers—at least in Texas—with greater certainty about the legality of mandatory vaccination policies. In December 2020, the EEOC issued interim guidance that suggested employers may mandate COVID-19 vaccines (subject to reasonable accommodation and sincerely held religious belief considerations). Replying on the EEOC’s guidance, a Houston hospital implemented a mandatory COVID-19 vaccination policy earlier this year. This policy was met with resistance and more than 100 current and former employees joined in a lawsuit against the hospital, seeking to enjoin the enforcement of the policy, arguing that refusal to comply would equate to wrongful termination under various public policy causes of action. Central to the plaintiffs’ lawsuit, they argued that any such mandatory vaccination policy amounted to unlawful coercion (i.e., the threat of termination) for refusal to take an “experimental” vaccine that has only been approved under the FDA’s emergency use authorization. The Court rejected this argument and dismissed the case. The Court concluded that there was nothing illegal or against public policy about receiving the COVID-19 vaccine. While the Court stressed that vaccine safety and efficacy were not considered in adjudicating this case, it also acknowledged that the employer’s mandatory vaccination policy would, in its judgment, provide a safer work environment for employees and patients. Importantly, the Court also emphasized that a private employer’s mandatory vaccination policy does not amount to coercion: “[an employee] can freely choose to accept or refuse a COVID-19 vaccine; however if she refuses, she will simply need to work somewhere else.” While this case serves as an important bellwether, it’s application could be limited—particularly in other states that provide for more expansive public policy claims. The claim chiefly relied on by the Texas plaintiffs is extremely narrow in application and generally only applies in instances where an employee is terminated for the refusal to perform an illegal act that carries criminal penalties. In short, while the legal analysis could differ in other states, employers can now cite at least one legal opinion that has endorsed the use of mandatory vaccination policies. Polsinelli attorneys will continue to monitor COVID-related employment litigation and provide updates. If you have questions about this decision, contact your Polsinelli attorney.