Complete Story
08/27/2024
Non-Compete Ban Ruled Unlawful
Federal Trade Commission's Non-Compete Ban Ruled Unlawful
A Federal District Court in Texas has halted the Federal Trade Commission’s ban on non-compete agreements and has blocked enforcement nationwide. Scheduled to take effect on September 4, 2024, the FTC’s ban sought to invalidate most non-compete agreements between employers and employees. For all but the top senior executives, existing non-compete agreements would have been immediately invalidated, and new non-competes prohibited altogether.
Recently, the FTC (among other government agencies) had been criticized for exceeding its authority. And on August 20, 2024, Judge Ada Brown of the Federal District Court of the Northern District of Texas agreed, ruling that the FTC’s non-compete ban was arbitrary and capricious.
Significantly, Judge Brown cited Loper Bright Enterprises, a recent case in which the United States Supreme Court critically weakened federal agencies’ power to set rules. This decision out of the Northern District of Texas, therefore, will likely be one of many citing Loper Bright Enterprises to limit federal agencies’ power.
There will be an appeal to the Fifth Circuit, where the non-compete rule is expected to face a hostile reception. And other courts are also considering the legality of the non-compete rule, thereby guaranteeing continued litigation for the foreseeable future, including a likely appeal to the U.S. Supreme Court. Based on the trend to limit federal agency power, it now appears doubtful that the non-compete rule will ever become effective in its current form.
What does that mean for you? Employers that were planning to comply with the non-compete rule can now stand down. The non-compete ban will no longer take effect on September 4, 2024, or any time soon.
For now, employers can continue to operate without the constraints of the FTC’s proposed rule.
Auman Mahan + Furry