The Court for the Northern District of Texas (the Court) issued a decision blocking the Federal Trade Commission’s (FTC) ban on non-compete agreements, which was set to go into effect September 4, 2024. The ban would have invalidated non-compete clauses, which typically prohibited workers from their previous employer’s competitor or establishing a competing business of their own. The ban allowed for previously established non-compete agreements between the employer and specific executives to remain in effect; however, all other employees’ non-competes were void. Employers were also prevented from issuing new non-compete agreements.
The Court stated in its opinion highlighted the FTC’s failure to justify why it had banned virtually all non-competes instead of targeting specific, harmful non-competes, and held that the FTC lacked the authority to implement such a rule, thus exceeding their authority. The Court further cited the Supreme Court’s decision in Loper which overturned the “Chevron doctrine” that required courts to give substantial deference to agencies such as the FTC when interpreting law.
Due to this decision, non-compete agreements will remain effective, and employers are able to establish new agreements with employees. It remains to be seen whether the FTC will appeal this decision, although it is anticipated that it will do so. Employers should be mindful of any state-specific requirements with regard to their non-compete agreements and the applicability to their business and employees.
For additional information please reach out to our Director of Compliance at twandler@ibpllc.com
