On August 20, 2024, Judge Ada Brown, a Texas federal judge, issued an order halting the Federal Trade Commission’s (“FTC”) worker non-compete rule. The court order prevents the FTC ban from taking effect on September 4, 2024. Judge Brown’s order says that the FTC lacks statutory authority to promulgate the non-compete rule and that the proposed rule is arbitrary and capricious. The ruling holds that the rule is unlawful, “shall not be enforced or otherwise take effect” and must be set aside. The order is effective nationally throughout the United States.
Since the order sets aside the ban on non-competes, existing and valid non-compete agreements will remain in full force and effect. Furthermore, the notice provision in the FTC non-compete rule are no longer applicable. Employers should consider rescinding any notices already sent, if applicable. Although the ruling applies to the FTC rule, it does not apply to any state or local laws or regulations concerning non-compete agreements.
We recommend that employers consult with legal counsel regarding the status of any existing restrictive covenants containing non-compete restrictions as to their continued enforceability.
