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legislation of their own.9 Recent state legislation has focused,
among other issues, on restricting the use of non-competition
agreements to employees above a certain compensation level.
Current Mississippi Law regarding Non-Competition Agreements
Mississippi has no statute governing non-compete agreements.
In other words, Mississippi’s law governing non-compete agree-
ments derive purely from common law. Generally speaking, the
Mississippi Supreme Court holds that restrictive covenants—such
as non-competition clauses and agreements—are “in restraint of
trade and individual freedom and are not favorites in the law...."10
As a result, Mississippi courts hold that such clauses and agree-
ments must be “strictly interpreted” and the company seeking
to enforce a non-compete “bears the burden to prove that the
restriction is reasonable in light of the economic interest sought
to be protected.”
While being generally disfavored, Mississippi courts will honor
and enforce restrictive covenants, such as non-competition agree-
ments, depending on the restriction’s overall “reasonableness,”
as well as the specificity of its terms—primarily, the restrictions
duration, scope and geographic limitation.11 Courts also evaluate
and balance the effect a provision will have on the rights of the
contracting parties, as well as the rights of the public.12 So, while
a six-month or 20-mile limitation may be deemed enforceable in
one case, the same court may hold that a two-year time limit or
a state-wide restriction is enforceable in another. In employment
contexts, employers bear the burden of demonstrating that the
restrictive covenant is reasonable in scope and duration and must
also show that the provision is justifiable and necessary to protect
its interests.13
Duration
Mississippi law does not define a duration of time that is
deemed per se reasonable for restrictive covenants. In fact,
Mississippi courts have enforced non-competition provisions
with varying time durations, with the enforcement based on the
duration’s impact on the overall reasonableness of the restric-
tion.14 Mississippi courts have upheld restrictions of one year or
more on numerous occasions.15
Scope of Activity
To be enforceable, a non-compete agreement should “clearly
delineate the scope” of the activities restricted and/or permitted
during the restriction period. For example, in employment cases,
a non-competition agreement should clearly outline the scope of
the employee’s permissible business activities following the termi-
nation of employment.16
Geographic Scope
Mississippi courts also scrutinize geographic limitations in non-compe- earn over a certain amount in wages. Under the FTC’s rule, even
tition agreements, with their focus on whether the provision is oppressive rule because they do not go far enough in prohibiting the use of
or imposes an undue hardship on the restricted party. Mississippi courts
have upheld restrictions of 75 miles or more on numerous occasions.17
14 SUMMER 2023
January 2023 – FTC Issues Proposed Rule in Response to
Executive Order
Back on the national stage, in early January 2023, the
FTC, appearing to meet the President’s challenge, announced
a proposed rule18 that would all but outright ban the use of
non-compete agreements by employers in the United States. The
FTC’s proposed rule is sweeping. With only limited exceptions,
it would: (1) retroactively invalidate all existing non-compete
agreements between employers and employees, and (2) prohibit
employers from using such agreements in the future.19
The FTC’s definition of “non-compete” is very broad. It cov-
ers not only conventional non-compete agreements – where an
employee cannot work for a contractually-defined “competitor”
for a set period of time after their current employment ends—it
also prohibits any agreement that “has the effect of prohibiting
the worker from seeking or accepting employment with a per-
son or operating a business after the conclusion of the worker’s
employment with the employer.” This means that other widely
used post-employment restrictions, such as non-solicitation
agreements and non-disclosure agreements, could be prohibited
by the rule if they are written too broadly.
The proposed rule is also broad in the kinds of individuals
and entities that it covers. As written, the FTC’s proposed rule
governs non-compete agreements with employees, independent
contractors, volunteers, and even interns. On the employer side,
the proposed rule would reach “any natural person, partnership,
corporation, association, or other legal entity, including any per-
son acting under color or authority of State law”—regardless of
the size of the entity.
Perhaps the most controversial feature of the proposed rule
is that it would be retroactive in application—in other words, it
would bar not only future non-compete agreements, but would
also retroactively invalidate any covered agreements that have
already been entered into by employers and employees. If adopted
as written, the proposed rule would require employers to rescind
existing non-compete agreements and to notify the affected
worker, in writing, within 45 days that the agreement has been
rescinded and that they are free to have competitive employment
in the future. This notification requirement would apply both to
current employees and former employees, provided the employer
had the worker’s contact information.
In addition, the FTC’s proposed rule invalidates any state
laws that offer workers less protection than the FTC’s rule. This
would include Mississippi’s common law regarding non-compete
agreements. In recent years, some states have made efforts to scale
back the use of non-compete agreements by employers—such as
by limiting them to only exempt employees or employees who
these types of limitations would be overridden by the federal
non-compete agreements altogether.
Showing how truly broad the FTC’s proposed rule is, the only
exception that it expressly identifies are non-compete agreements