**UPDATE – FEDERAL COURT STRIKES DOWN NON-COMPETE BAN**
On Tuesday, August 20, 2024, Judge Ada Brown from the Northern District of Texas granted the Plaintiffs’ motion for summary disposition in the case challenging the Federal Trade Commission’s (“FTC”) rule banning non-compete agreements (“Noncompete Rule”). The immediate effect is the rule is invalid, and no employer nationwide has to abide by it.
The ruling cited two lines of reasoning for setting aside the Noncompete Rule:
- The first is that Congress has only granted the FTC the authority to issue procedural rules, and not substantive ones, and the Noncompete Rule is inarguably substantive.
- The second line of reasoning was that even if the FTC did have the power to promulgate this rule, it is arbitrary and capricious.
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- It is unreasonably overbroad without reasonable explanation for its breadth.
- It imposes a one-size-fits-all approach with no end date.
- While there are state laws regulating non-compete agreements, none is as broad as the Noncompete Rule.
- The FTC didn’t consider the positive benefits of non-compete agreements.
- The FTC did not sufficiently address potential alternatives to a blanket nationwide ban.
This decision will most likely be appealed, and we will continue to monitor the case moving forward.
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