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On August 20, 2024, the District Court for the Northern District of Texas found that the FTC’s recent Rule banning all noncompete agreements was unlawful, and the Court enjoined the Rule’s enforcement nationwide. The Court concluded that Congress did not explicitly give the FTC substantive rulemaking authority, thus the FTC exceeded its statutory authority. Additionally the Court found that the FTC’s ban on noncompete agreements was arbitrary and capricious because the Rule was unreasonably overbroad without a reasonable explanation. Specifically, the ban used a “one-size-fits-all” approach with no end date.
The Rule, which was set to go into effect on September 4, 2024, has been set aside, and will not be enforced. It is anticipated the Court’s decision may be appealed, so watch for further updates, but currently Employers should not send out any notices to employees as was originally required by the FTC’s Rule. However, given the heightened scrutiny on noncompete agreements, Employers are encouraged to continue to review their noncompete agreements to make sure that both the written agreements and the employer’s practices are compliant with state law.
For more information about the recent decision enjoining the FTC’s Rule banning noncompete agreements and other recent changes to labor and employment law, contact one of KWGD’s Labor & Employment attorneys or register for our upcoming 2024 Employment Law Update, being held on October 23, 2024.
Kallen L. Boyer, Esq.
330-497-0700
kboyer@kwgd.com