Judge Blocks FTC Final Rule
The U.S. District Court for the Northern District of Texas on Aug. 20 set aside the Federal Trade Commission’s (FTC’s) proposed ban on most noncompete agreements. This means the rule will not be enforced or take effect on Sept. 4 as intended.
Judge Ada E. Brown ruled that the FTC didn’t have the authority to issue such a broad action and that the rule was arbitrary and capricious.
“The Commission’s lack of evidence as to why they chose to impose such a sweeping prohibition ... instead of targeting specific, harmful noncompetes, renders the rule arbitrary and capricious,” Brown wrote.
She ruled in favor of the plaintiffs in the case: tax services and software provider Ryan LLC; the U.S. Chamber of Commerce; the Business Roundtable; the Texas Association of Business; and the Longview Chamber of Commerce. Her decision renders the injunction against the rule permanent and nationwide.
Federal Judge in Texas Strikes Down FTC Noncompete Ban
SHRM | Aug 2024
Effective date: *Blocked* 9/4/24 - 120 days after the FTC published it in the Federal Register.
Final Rule
Press Release
Resources and Model Notices (about halfway down the page)
FTC | Apr 2024
Legal Update
The Federal Trade Commission (FTC) is appealing a federal court ruling that struck down the agency’s proposed ban on most noncompete agreements.
The FTC filed its appeal Oct. 18 to the U.S. Court of Appeals for the 5th Circuit challenging an Aug. 20 decision by the U.S. District Court for the Northern District of Texas that set aside the agency’s rule on noncompetes.
FTC Appeals Noncompete Ban Ruling
SHRM | Oct 2024
FTC Appeals Texas District Court Ruling That Blocked Noncompete Ban to Fifth Circuit
Ogletree| Oct 2024
Law Firm Articles
Note: The following resources were published prior to the August 2024 blocking of the final rule
.The rule is being challenged in two lawsuits seeking, among other things, a temporary stay of the rule’s effective date. In one case, in the U.S. District Court for the Northern District of Texas, the court has indicated it will rule on whether to issue a stay by July 3, 2024. If a stay is not issued by August 1, 2024, employers should begin planning for the rule to take effect by September 4, 2024 (120 days from the rule’s May 7 publication date in the Federal Register).
FTC’s Ban on Non-Compete Agreements: Definitions, Prohibitions, Requirements, and Employer Considerations
Ogletree | May 2024
The federal government took an unprecedented step yesterday by finalizing a rule that seeks to ban non-competition agreements between nearly all employers and all workers. If the rule survives legal challenges, you will not only be prohibited from entering into most new non-competes, you’ll also be prevented from enforcing existing non-competes in all but a few circumstances, such as against a limited class of senior executives.
Feds Ban Non-Compete Agreements: A 5-Step Plan for Employers
Fisher Phillips | Apr 2024
Existing non-compete agreements with senior executives remain enforceable. Employers must notify all other workers that existing non-competes are unenforceable by the effective date.
New FTC Rule Bans Non-Compete Agreements in All Employment Contracts
Holland & Knight | Apr 2024
“Non-compete” redefined. The FTC notes that this definition of “non-compete” applies not only to non-competes, but terms that function as non-competes—meaning any contractual provision that “has the effect of prohibiting the worker from seeking or accepting employment.” As examples of agreements/terms that may function as non-competes, the FTC identifies: (1) a nondisclosure provision that is “written so broadly that it effectively precludes the worker” from working in the same position for a new employer and (2) a provision that requires a worker to repay training costs where the repayment is not “reasonably related to the costs” of the training.
FTC Adopts Final Rule Banning Employers From Entering Non-Competes
Ogletree | Apr 2024
Related Reading
Note: The following resources were published prior to the August 2024 blocking of the final rule
The organizations that sued to block the Federal Trade Commission’s (FTC’s) final rule prohibiting most noncompete agreements from taking effect will not have to abide by the rule until their litigation is resolved, a federal judge ruled July 3.
The U.S. District Court for the Northern District of Texas granted the preliminary injunction and postponed the effective date of the rule for the plaintiffs: Ryan, LLC; the U.S. Chamber of Commerce; the Business Roundtable; the Texas Association of Business; and the Longview Chamber of Commerce. The ruling applies to the organizations as employers; businesses that are members of the groups and associations would still need to follow the FTC’s new noncompete rule when it takes effect Sept. 4, though the judge said the court would rule on the merits of the rule on or before Aug. 30.
Lawsuits were quickly filed against the rule when it was announced, arguing that the FTC lacks the authority to prohibit noncompete agreements. SHRM and others filed amicus briefs in support of delaying the rule from going into effect while litigation is ongoing.
Court Blocks Effective Date of FTC’s Noncompete Rule for Plaintiffs Only
SHRM | Jul 2024
U.S. employers should maintain the status quo until the fate of a motion to halt the Federal Trade Commission’s (FTC’s) rule prohibiting most noncompete agreements is decided.
That’s what one legal expert communicated to SHRM members in a recent webinar.
Michael Wexler, a partner in the Chicago office of Seyfarth, recommended that employers monitor the progress of the legal challenges to the FTC rule—critical decisions are expected next month—while also preparing to comply if the rule ultimately goes into effect Sept. 4.
Employers Advised to Await Court Decisions on FTC Noncompete Rule
SHRM | Jun 2024
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