A Texas Federal Judge issued a decision blocking the FTC’s proposed ban on non-compete agreements, which was set to go into effect on September 4, 2024. As previously reported, the Texas Federal Court had issued a preliminary injunction limiting the enforceability of the FTC’s non-compete ban for the individual plaintiff in that lawsuit only. The Judge has now expanded that ruling nationally – preventing the FTC non-compete ban from going into effect.
The Court found that the FTC improperly exceeded its authority by creating a new rule banning non-compete agreements. The Court found that the “sweeping” rule is a “categorical ban” that is impermissible, holding: “In sum, the Court concludes that the FTC lacks statutory authority to promulgate the Non-Compete Rule, and that the Rule is arbitrary and capricious. Thus, the FTC’s promulgation of the Rule is an unlawful agency action.”
The FTC has said that it is seriously considering appealing the Court’s ruling, and that it would continue to review non-compete agreements on a case-by-case basis for enforceability. For now, however, the much anticipated and litigated non-compete ban is stalled and will not go into effect on September 4, 2024.
What does this mean going forward?
It is important to remember that some state and local laws may limit non-compete agreement enforceability. Additionally, there are limitations typically imposed by courts on the enforceability of non-compete agreements. Generally, to be enforceable a non-compete agreement must be no greater than necessary to protect the legitimate interests of the employer. To determine if a non-compete is enforceable, courts consider an employee’s job duties, the employer’s business interest, and the language of the agreement.
Subject to these general limitations, non-compete agreements remain enforceable and existing agreements will be reviewed on a case-by-case basis at the local, state, and federal level, and subject to state limitations.
Should you have any questions regarding the above or non-compete agreements in general, please contact the authors, the Garfunkel Wild attorney with whom you regularly work, or contact us at [email protected].