FTC's Non-Compete Ban Struck Down by Federal Judge in Texas

A federal judge in Texas has blocked the Federal Trade Commission's rule banning non-compete agreements in most circumstances. The FTC’s rule was set to go into effect nationally on Sept. 4.

In her Aug. 20 ruling, U.S. District Judge Ada Brown of Texas set aside the FTC rule as an unlawful agency action and held that the FTC’s rule shall not be enforced or otherwise take effect on Sept. 4 or thereafter. The FTC may appeal the court's decision, according to news reports.

What Does This Mean for Your Business?

• The FTC rule will not take effect unless the court’s recent ruling is overturned on appeal. There are still two cases pending in other courts, but the decisions in those cases cannot change the Texas court’s Aug. 20 ruling. Only an appellate court can change that. Any appeal could take months or years, and ultimately may be decided by the U.S. Supreme Court.
• The enforceability of non-competes will continue to be based upon state law. For example, for Minnesota businesses, the Minnesota legislature banned most non-competes prospectively in a law that became effective on July 1, 2023. Many other states also have laws restricting non-competes, and there are continuing efforts to restrict them at the state and federal levels.

We Can Help

If you have questions about how to protect your company’s legitimate business interests amid varying laws and court rulings, please contact Maslon's employment and non-compete attorneys.