Federal Court Blocks FTC’s Rule Banning Non-Competes

The Federal Trade Commission’s ban on non-competes is on hold—at least for now. Late yesterday afternoon, a federal judge in the Northern District of Texas blocked the FTC’s rule banning non-competes. The court ruled that the FTC exceeded its statutory authority and that the rule was arbitrary and capricious.

The federal court had previously issued a preliminary injunction against the rule on similar grounds, but that injunction applied only to the plaintiffs in the Texas case. In yesterday’s decision, the court set aside the rule entirely, preventing it from taking effect or being enforced against any employers nationwide.

The court’s decision is important for employers using non-compete agreements, because the FTC’s rule would have rendered most non-compete agreements unenforceable, imposed notice requirements, and posed substantial changes to employment contracts nationwide. The pending implementation of the FTC’s rule had created significant uncertainty for those employers, who otherwise faced an early September 2024 deadline for notifying employees of the rule.

Under this decision, employers can continue using and enforcing non-compete agreements without the constraints of the FTC’s rule. Because the FTC is likely to appeal, however, employers should continue monitoring this issue until the appeal process has concluded.

If you have any questions about this development or how the decision impacts your organization or non-complete agreements, we encourage you to contact your Miller Johnson employment attorney. Stay tuned for any further developments.