Three Lawsuits Have Been Filed to Stop the FTC’s Non-Compete Ban (Initial Rulings Expected By Early July)
In April of 2024, the Federal Trade Commission (FTC) announced a comprehensive regulation banning most employee non-compete agreements nationwide. The regulation is set to take effect in September of 2024. However, several lawsuits have already been filed in an effort to block the rule. Within this article, you will find a brief overview of the FTC’s regulation, a discussion of the lawsuits that have been filed, and explanation of what is expected next.
Regulatory Action: FTC Finalizes Rule Prohibiting Most Employee Non-Compete Agreement
The FTC altered the landscape of employment contracts with its Final Rule barring most employee non-compete agreements. Notably, the regulation also voids most existing non-competes. Indeed, the new regulation maintains current non-compete agreements only for “senior executives.” Still, if and when the rule takes effect, it will bar virtually all non-compete agreements nationwide.
Three Lawsuits are Currently Pending to Try to Stop Enforcement of the Regulation
It is important to emphasize that the FTC’s non-compete rule has not yet taken effect. Further, as of May 10th, 2024, there are three pending lawsuits that are seeking to delay/block the regulation. Here is an overview of the specific lawsuits that have already been filed:
- Northern Texas: Ryan LLC v. FTC
- Eastern Texas: Chamber of Commerce et al. v. FTC
- Eastern Pennsylvania: ATS Tree Services LLC v. FTC
Each lawsuit argues that the FTC’s rule exceeds its statutory rulemaking authority and is arbitrary, pointing to a potential overreach in federal power. These proceedings are crucial as they will determine whether or not the FTC’s rule, in its current form, is allowed to take effect.
What Comes Next: Rulings Expected By Early July, Rule Could Still Take Effect in September
Under federal rulemaking procedures, agency regulations—including the FTC’s ban on most non-compete agreements—take effect 120 days after they are published to the federal register. Given that timeline, the FTC regulation will not take effect until September of 2024 at the earliest. While employers and employees should be proactive, no legal changes will happen until that date.
As the legal battles unfold, the future of the FTC’s Final Rule hangs in balance. Initial rulings from the courts are anticipated by early July. They will provide clearer direction regarding the implementation/enforcement of the regulation. It is possible all courts will allow the regulation to move forward. However, if any federal court blocks the non-compete ban, implementation could be delayed. Notably, the Chamber of Commerce in the United States District Court for the District of Eastern Texas because that court is likely to be most favorable to its argument.
Get Help From an Employment Attorney in Florida
The FTC ban on non-compete agreements could be bringing significant changes to employment law in Florida. Employers and employees need to be prepared. If you have any specific questions or concerns about an issue related to a non-compete agreement, contact our Florida attorney for help.
