Federal Court in Texas Temporarily Enjoins FTC’s Non-Compete Ban
Earlier this year, the Federal Trade Commission (FTC) issued a final regulation barring virtually employer-employee non-compete agreements nationwide. That rule was initially set to take effect in September of 2024. A delay is looking more and more likely. According to a report from the American Bar Association (ABA), a federal court in Texas has temporarily enjoined the FTC’s non-compete ban. Here, you will find an overview of the proposed federal non-compete regulation, the courts, decision, and what it means for employers and employees in Florida.
The FTC Issues a Final Rule Dramatically Restricted Non-Compete Agreements
The Federal Trade Commission (FTC) introduced a sweeping Final Rule on April 23, 2024 that was aimed at voiding nearly all existing non-compete agreements and prohibiting nearly all future non-compete agreements between employers and employees. The regulation—which came after a multi-year rulemaking process—was initially set to take effect on September 4, 2024.
Notably, the FTC non-compete ban mandates employers to notify workers with existing non-competes that these agreements would no longer be enforceable. The decision, which followed public commentary and a 3-2 vote by the agency, was immediately challenged by several business interests groups. Multiple lawsuits were filed to try to block the implementation of the rule.
Federal Court in Texas has Temporarily Enjoin the Regulation, Possibly Imperils Regulation
In July 2024, a Texas federal court issued a preliminary injunction that temporarily halted the enforcement of the FTC’s recent rule banning non-compete agreements. However, the injunction applied only to the specific plaintiffs in the lawsuit. The court found that the FTC likely lacked the authority to issue such a sweeping prohibition under its current statutory mandate. It labeled the final rule as “arbitrary” and “overly broad.” Further, the court emphasized that the rule failed to consider alternatives or the potential benefits of non-compete agreements. The ruling has left significant uncertainty about the rule’s broader applicability.
What Comes Next: FTC Non-Compete Subject to Litigation, May End Up in Supreme Court
As frustrating as it can be for both employers and employees in Florida, there is still a ton of uncertainty regarding the FTC’s final non-compete rule. The ongoing litigation surrounding the FTC’s non-compete rule could end up in the Supreme Court of the United States. As the Texas district court has scheduled to issue its final ruling by August 30, 2024, the outcome could significantly influence the nationwide enforceability of the FTC’s rule. Beyond that, parallel litigation in Pennsylvania is set to decide on a similar injunction request. Given the inherent risks, employers are advised to take a cautious approach regarding non-compete agreements until there is more clarity on the enforceability of the FTC’s regulation.
Get Help From an Employment Law Attorney in Florida
The FTC’s proposed final rule barring most non-compete agreements remains subject to litigation. If you have any specific questions or concerns about a non-compete agreement, please do not hesitate to contact an experienced Florida employment lawyer for a confidential initial consultation.
