Federal Judge Blocks FTC Non-Compete Ban (For Now)

A federal judge has thrown out the Federal Trade Commission’s ban on noncompete agreements nationwide. The FTC’s Rule banning non-compete agreements for most employees was set to take effect on September 4, 2024.

What Happened?

On August 20, 2024, Judge Ada Brown in the Northern District of Texas struck down the FTC’s ban on non-compete agreements. The court held that federal law mandated she “hold unlawful” and “set aside” the non-compete ban nationwide. The order applies uniformly to all parties in every district across the country. 

The court ruled that the FTC non-compete ban was invalid for two reasons.

First, the court ruled that the agency lacked the authority to issue the rule, stating that Congress had only empowered the FTC to create procedural rules for addressing unfair competition, not substantive ones. 

Second, the court ruled the FTC ban was “arbitrary and capricious.” Judge Brown found that the FTC rule was overly broad as it struck down almost all non-competes without any limits on time and a one-size-fits-all approach. Judge Brown further found that the FTC failed to consider positive benefits of non-compete agreements, and dismissed alternative to the broad ban it issued. 

What’s Next?

The FTC can still appeal Judge Brown’s ruling to the Fifth Circuit Court of Appeals to challenge the ruling. Regardless of a possible appeal.

The FTC ban on non-competes will not go into effect on September 4 as initially planned.

What Should I Do? Back to the Status Quo

For employees- 

Employees can no longer wait until September 4 for a get out of jail free card for their non-compete. Employees currently working under a non-compete agreement or negotiation a new one should seek out an attorney to analyze the enforceability of their non-compete. Former employees who receive a cease-and-desist letter or are threatened with litigation should contact an attorney immediately to discuss any potential liability they may have. 

For employers-

The unsettled waters have finally calmed. Employers no longer need to prepare for September 4, 2024, or formulate new strategies to protect their market share and goodwill. Still, employers may want consult with an attorney to review their non-compete agreements to ensure they are enforceable under current laws in South Carolina or other states. 

We Can Help

Grove Ozment assists employees and employers drafting and negotiating non-compete agreements. Grove Ozment files and defends lawsuits on behalf of individuals and companies litigating non-competes and other restrictive covenants.  Contact Grove Ozment for a consult to help navigate you non-competition issue in South Carolina.