8/26/24: Federal Judge Sets Aside the FTC’s Recent Non-Compete Ban

August 9, 2024

By Nicole Elgin & Hannah LaChance

On August 20, 2024, Federal District Court Judge Ada Brown in the Northern District of Texas blocked enforcement of the Federal Trade Commission's (FTC) non-compete rule. In April, the FTC issued a rule banning most employers across the United States from enforcing non-competition provisions as a term or condition of employment and largely voiding existing non-competition clauses. The rule was expected to take effect in September. More information on the rule is available from our prior E-Alert.

The court that blocked the rule held that while the FTC has limited authority to create rules that restrict unfair competition, the FTC does not have the right to create substantive rules through the methods that it used to enact the non-compete ban. In essence, the federal judge stated that the FTC over-reached its power when it issued the non-compete ban, and that the ban is therefore invalid. 

The FTC may try to appeal the decision, but will now be unable to enforce the rule on a broad scale, though the agency claims that it can pursue case-by-case actions to restrict the use of non-competition agreements. Non-competition agreements are still increasingly difficult for employers to maintain given recent developments from the National Labor Relations Board and state law restrictions, like in Oregon and Washington. 

For questions regarding non-competition agreements, contact Nicole Elgin at 503-276-2109 or nelgin@barran.com.

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