Client Advisory: On August 20, 2024, the United States District Court for the Northern District of Texas issued a ruling setting aside the Federal Trade Commission’s (FTC) proposed ban on non-competition agreements that was to take effect on September 4. The Court ruled that the FTC exceeded its authority in issuing such a sweeping ban and found that the proposed rule was “arbitrary and capricious”. This court ruling has national effect. While the FTC is apparently considering an appeal, for the time being the proposed rule will not go into effect.
This means that all existing non-competes will not be automatically nullified and, to the extent they were otherwise enforceable under existing law, they will remain so. They will continue to be subject to the existing state law structure in terms of their relative enforceability. Prudent employers might use this as an opportunity to have counsel review and, where appropriate, tighten up existing restrictive covenants in the employment context.
If you need assistance for a similar matter, please reach out to Scott Centrella.
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