Court Strikes Down FTC Noncompete Ban: Key Updates for Employers

The FTC’s proposed rule to ban noncompetes, which came out in April 2024, faced extensive opposition from many businesses and employer groups. Following a series of lawsuits, on August 20, 2024, U.S. District Judge for the Northern District of Texas, Ada Brown, issued a nationwide injunction striking down the FTC’s Noncompete Ban. This means it will no longer be taking effect on September 4th. Here’s what employers need to know.

Key Updates for Employers: FTC Noncompete Ban 

1. No Immediate Changes to Noncompete Agreements: The FTC’s proposed ban on most noncompete agreements will not take effect on September 4, as originally planned. Employers can continue using noncompete clauses under current laws for now. 
2. Court’s Ruling on FTC’s Authority: The court found that the FTC overstepped its authority by attempting to implement such a broad ban, labeling the rule as “arbitrary and capricious”. This ruling is nationwide, which means the proposed ban is effectively nullified unless overturned on appeal. 
3. Potential for Future Litigation: Although the rule has been blocked, the FTC may still challenge specific noncompete agreements through individual enforcement actions. Employers should remain vigilant and ensure their noncompete agreements are reasonable and compliant with state laws. 
4. Potential Appeals: The FTC is considering appealing the court’s decision, so employers should stay updated on any future changes or legal challenges regarding noncompete agreements. 

For more information, check out our blog on the FTC’s proposal to ban most noncompetes. 

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