August 22nd, 2024

Cease the Paperwork: Nationwide Reversal of FTC Non-Compete Rule

Just days before its intended implementation on September 4, 2024, the FTC’s comprehensive ban on non-compete agreements has been struck down by a federal judge in Texas. In her detailed 27-page opinion, US District Court Judge Ada Brown ruled that the FTC lacked the authority for such a sweeping mandate, criticizing the rule as arbitrary and capricious for several reasons:

  • Overreach and Lack of Explanation: The rule was condemned for being unreasonably broad without sufficient justification, applying a one-size-fits-all policy indefinitely.
  • No Precedent: Judge Brown highlighted that no state has ever enacted a non-compete ban as expansive as the FTC’s proposal.
  • Oversight of Benefits: The FTC’s failure to acknowledge the potential benefits of non-competes was a significant oversight, according to Brown.
  • Neglecting Alternatives: The decision also pointed out the FTC’s lack of consideration for less restrictive alternatives to outright bans.

Earlier today, we alerted you about the FTC's impending rule that aimed to prohibit non-compete clauses for virtually all employees and independent contractors nationwide. This would have required employers to notify all applicable personnel by the September 4 deadline. We received an alert about this new court ruling just minutes after sending our alert earlier today!

What This Means for You

With Judge Brown’s ruling, which extends nationwide, unlike her earlier temporary suspension in July that was limited to the named plaintiffs, employers are no longer required to send out these notices. For now, non-compete agreements remain a viable tool for protecting your business's sensitive information and competitive edge.

Looking Ahead

The FTC has expressed disappointment with the ruling, with spokesperson Victoria Graham stating that the agency is "seriously considering an appeal." Additionally, another case concerning the non-compete ban remains pending in the Eastern District of Pennsylvania, where the judge has declined to enjoin the rule. Thus, it is still possible that the FTC may win on an appeal, and, once again, businesses would be required to notify their workers, although the deadline may change.

The future of the non-compete ban remains uncertain, and we advise staying alert to further developments. We will continue to keep you updated on this matter and are here to assist you with any questions or concerns regarding how these changes may affect your business.

Do you have questions about the issues discussed above? Reach out to us at:

At Wilkinson Law, we give business owners the clarity they need to fund, grow, protect, and sell their businesses. We are trustworthy business advisors keeping your business on TRACK: Trustworthy. Reliable. Available. Caring. Knowledgeable.

Categories: Important Legal News