ARTICLE
27 August 2024

FTC Noncompete Ban Killed Before Taking Effect

LL
Liskow & Lewis

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Liskow is a full-service law firm providing regulatory advice, transactional counsel, and handling high-stakes litigation for regional and national companies. Liskow lawyers are strategically located across the gulf coast region and serve clients in the energy, environmental, and maritime sectors, as well as local and regional businesses in virtually all industries.
The FTC's ban on noncompete agreements has been struck down for all employers nationwide just two weeks before it was to take effect.
United States Employment and HR

The FTC's ban on noncompete agreements has been struck down for all employers nationwide just two weeks before it was to take effect. The key points regarding the Texas federal district judge's rulings are:

  • All existing and new noncompete agreements consistent with state law are still effective.
  • Employers will not have to comply with the FTC's ban by September 4, 2024, as originally scheduled.

The court struck down the rule for two reasons. First, the FTC exceeded its statutory authority in promulgating the substantive rule because Congress only authorized it to issue procedural, not substantive, rules to address unfair methods of competition. Second, the rule was arbitrary and capricious because it was unreasonably overbroad without a reasonable explanation. Importantly, the court's ruling applies to all employers across the country.

The FTC could appeal the decision, but that would put the case in the hands of the United States Court of Appeals for the Fifth Circuit, which is virtually certain to affirm it. Therefore, it is highly unlikely that the rule will ever become law. After some anxious waiting, employers can turn their attention to complying with state law restrictions on noncompete agreements and cease worrying about the FTC Ban.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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