The Federal Trade Commission’s Non-Compete Ban has been blocked by a U.S. District Court. What now?

The non-compete rule by the Federal Trade Commission (FTC) that sought to prohibit non-compete agreements across the country was scheduled to be implemented on September 4th of 2024; however on August 20th the U.S District Court, for the Northern District of Texas invalidated the rule preventing its enforcement stating that the FTC had overstepped its legal powers and that the rule itself seemed random and unreasonable thereby contravening the Administrative Procedure Act. This decision essentially prevents the FTC from enforcing the prohibition on non-compete agreements nationwide unless it is overturned on appeal.

The recent ruling from the court is one piece of a larger legal dispute involving varying decisions from different courts regarding the FTC’s power to enforce the rule that could result in a division, among circuit courts and potentially escalate the matter to the U.S Supreme Court. No immediate action is needed from employers as the rule is currently inactive. They are not obligated to inform employees about non-compete clauses being unenforceable.

The FTC is likely to challenge the ruling in court. The bottom line, for now, is that companies can continue to use non-compete agreements if they comply with the applicable laws in their state. Every state has different laws regarding the enforceability of non-compete agreements. Employers and employees/independent contractors should contact an attorney in their state to ensure that their non-compete agreements are properly tailored to the law and industry. Chapkin Law represents employers and employees/independent contractors throughout the state of Florida. Contact us today to find out how we can assist you.