FTC Non-Compete Ban is Blocked Nationwide
On August 20, 2024, the U.S. District Court for the Northern District of Texas issued a final decision in a case before it concerning the Federal Trade Commission’s (FTC) Final Rule against noncompete agreements that was set to take effect on September 4, 2024. The Court barred the Final Rule from taking effect against any employer, nationwide.
As we reported last month, on July 3, 2024 Judge Ada Bown granted motions to preliminarily enjoin the FTC from enforcing the noncompete ban against the specific parties challenging it, and she wrote that she would issue a final decision on or before August 30, 2024. The reasoning in the District Court’s final decision replicates the previous July 3, 2024 Order, and adds that the proper remedy in a case such as this is to hold unlawful the FTC agency action and set it aside.
The FTC will almost certainly appeal the final decision to the U.S. Court of Appeals for the Fifth Circuit, which oversees federal district courts in Texas. Given that the Fifth Circuit Court of Appeals is among the most conservative federal appellate courts in the country, a successful appeal there—either in the form of an emergency order or a final order—is far from guaranteed. After a final decision from the Fifth Circuit, either party could appeal to the U.S. Supreme Court, which has also been fairly hostile toward the regulatory state in recent years. (Notably, the Texas District Court’s final decision repeatedly cited Loper Bright Enterprises v. Raimondo, in which the Supreme Court recently overruled the longstanding precedent that courts must give deference to federal agencies’ reasonable interpretations of the statutes they are charged with enforcing).
Here are the immediate takeaways for employers:
For the time being, there is no impeding legal obligation to respond to and address the FTC’s expansive Final Rule against noncompete agreements.
Continue to be mindful that the National Labor Relations Board’s General Counsel has publicly stated that she is committed to eradicating noncompete and non-solicitation agreements when they are applied to nonsupervisory employees—though it remains to be seen how the full Board will rule on the cases she brings.
State and local laws regarding noncompete agreements are unaffected by this ruling. Therefore, employers should remain focused on ensuring that any such agreements comply with the laws in which their employees are located as well as the laws of the state their agreements may select as the choice of law and venue.
