Earlier last week, a Texas federal court set aside the Federal Trade Commission’s (FTC’s) proposed ban on noncompete agreements, scheduled to take effect nationwide in just over two weeks. Thanks to the court’s actions, the ban will NOT take effect on September 4. Employers nationwide can maintain noncompete agreements as per state laws.
In 2023, the FTC proposed the ban and this past April a Final Rule was issued enforcing the ban effective September 4. A number of legal challenges were filed and one in particular – Ryan LLC v. Federal Trade Commission in the Northern District of Texas – left room for a nationwide injunction on the ban.
Tuesday, Judge Ada Brown struck down the nationwide ban for two reasons: the ban exceeds the FTC’s statutory authority and violates the Administrative Procedure Act.
While there may be appeals in the future, employers can continue to protect key relationships and confidential information with noncompete agreements. Just be sure they comply with applicable state laws and focus on critical employees, as the FTC has indicated it may pursue targeted investigations.
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