A U.S. federal district court judge in Texas has issued a nationwide injunction prohibiting the Federal Trade Commission’s (FTC) rule banning most non-compete agreements from going into effect. The rule would have gone into effect on September 4, 2024.
The judge issued a preliminary injunction in July temporarily blocking the FTC non-compete rule for a few employers. The preliminary injunction took effect while the court further considered the lawsuit by the U.S. Chamber of Commerce and a tax service firm seeking to strike down the rule. In her ruling, Judge Ada Brown found that the FTC lacked statutory authority to issue the non-compete rule and that it did so in an arbitrary and capricious manner due to its sweeping ban on most non-compete agreements. As a result, the judge set aside the non-compete rule as an unlawful agency action.
A Fort Lauderdale business transactions lawyer at Kramer Green is here to keep you and your business up-to-date on the quickly changing laws and regulations that directly affect your business operations. We will ensure you have the critical knowledge to effectively run your business and comply with all applicable local, state, and federal mandates. We can help you build and safeguard the business you have worked hard to develop and grow.
The FTC Non-Compete Rule
The FTC approved the ban on most non-compete agreements in May. Its supporters claim that non-compete agreements, which affect about 20% of workers nationwide, pose an unfair restraint on competition in violation of U.S. antitrust law. They also allege that non-compete agreements adversely affect workers’ mobility and earnings. While the FTC often issues rules that affect practices in specific industries, the agency rarely issues rules affecting widespread business practices across all industries.
The U.S. Chamber of Congress, among other business groups and opponents of the FTC non-compete rule, argue that it will hinder their efforts to protect trade secrets and other proprietary information. Opponents also accuse the FTC of attempting to micromanage their business affairs.
Other Court Rulings Concerning the FTC Non-Compete Rule
A Florida federal judge struck down the FTC non-compete rule last week. In his ruling, Judge Timothy Corrigan prevented the rule from being applied to a real estate developer based on the “major questions” doctrine. This legal theory provides that a federal agency may not address questions of “extraordinary economic and political significance” without permission from Congress.
On the other hand, a Pennsylvania federal judge ruled in favor of the FTC non-compete rule in July, finding that the agency was reasonable in issuing the rule and concluding that it was necessary to combat “exploitative and coercive” non-compete agreements.
Due to these conflicting decisions and almost certain appeals in these ongoing court battles, the end of the dispute over the FTC non-compete rule is far from over. As a result, while employers nationwide can continue to use non-compete agreements that comply with their states’ laws, they must be ever mindful of the potential for rapid changes in the rule’s status. Either way, the final resolution is unlikely to be quick, so employers should pay close attention to litigation concerning the rule. As always, businesses should ensure that they remain in compliance with all applicable rules and laws that apply to them.
Allow Us to Help You Protect Your Business Interests
You can count on an Aventura business transactions attorney at Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A. to assist you with all facets of your business operations, including non-compete agreements. Call our office today at (954) 966-2112 or contact us online to set up a time to discuss your legal business matters with our attorneys.