Federal Judge in Texas Blocks FTC’s Non-Compete Ban
On August 20th, 2024, the Wall Street Journal reported that a federal judge in Texas has blocked the FTC’s proposed nationwide restriction on most non-compete agreements. The ruling will prevent the FTC non-compete ban from taking effect on September 4th—as was previously scheduled. In this article, our Florida employment attorney provides an overview of the federal court decision, explains its implications, and discusses what could happen next.
Background: FTC Enacted Broad Non-Compete Restrictions (April 2024)
In April, the Federal Trade Commission enacted broad restrictions on non-compete agreements. As finalized, the FTC’s non-compete ban would bar private employers from entering into almost any non-compete agreement with an employee or independent contractor. There were narrow exceptions. The regulations also required businesses to free workers from existing non-competes once it took effect. Notably, several lawsuits were filed to stop the FTC non-compete regulations from taking effect. It was initially set to take effect nationwide on September 4th, 2024.
Federal Court in Texas Rules FTC Overstepped Authority, Blocks Regulation
On August 20th, 2024, a federal court in Texas ruled that the FTC overstepped its authority by attempting to enforce a nationwide ban on non-compete agreements. United States District Judge Ada Brown declared that the FTC lacked statutory power to enact such a broad regulation. Notably, the court found the rule to be not only an overreach but also arbitrary and capricious. As a result of this ruling, the FTC’s non-compete ban is blocked from taking effect.
Agency Appealed Texas Court’s Decision to the Fifth Circuit
On October 18, 2024, the federal agency appealed the Texas federal court’s decision blocking the FTC’s non-compete ban to the Fifth Circuit. While the appeals process is ongoing, it is very unlikely that the FTC’s non-compete ban will be allowed to take effect on a temporary basis. Instead, any appeal would be heard by the United States Court of Appeals for the Fifth Circuit. Notably, the Fifth Circuit is one of the more conservative-leaning appellate courts in the nation and is not considered a favorable venue for the FTC.
If an appeal to the Fifth Circuit is unsuccessful, the matter could eventually go to the Supreme Court of the United States for an ultimate adjudication on this specific ruling. Alternatively, the FTC could opt to withdraw the proposed non-compete and start the rulemaking process over. Though, the agency has not expressed public interest in that option. Lawmakers in Washington, DC could also potentially pass legislation restricting non-compete agreements. However, no bill of that kind has yet made any significant legislative progress in either House of Representatives or the U.S. Senate.
Contact Our Florida Employment Agreement Lawyer Today
At Perkins Law, our Florida employment attorney stays up to date on all of the latest legal and legislative developments regarding non-competes to better serve our clients. Have questions? We can help. Contact us today to arrange your confidential, no obligation initial consultation. We help employees and employers navigate non-compete agreements throughout South Florida.
Source:
wsj.com/us-news/law/judge-tosses-ftc-ban-on-noncompete-agreements-ae517b48
