August 27, 2024 - Judge Brown in the Northern District Court of Texas ruled last week
that the FTC did not have the right to issue its nationwide ruling deeming non-compete
agreements unenforceable and banning their use in all but the most limited
circumstances. The rule was scheduled to take effect Sept 4, 2024, but is now blocked
from enforcement nationwide for all employers.
In her ruling, Judge Brown said that the FTC didn’t have the authority to issue such a
broad action and that the rule was arbitrary and capricious, holding that “[t]he
Commission’s lack of evidence as to why they chose to impose such a sweeping
prohibition ... instead of targeting specific, harmful non-competes, renders the rule
arbitrary and capricious.”
The FTC’s ban would have covered all existing and new noncompete agreements for
U.S. workers, with exceptions for certain industries (airlines, financial services, and
nonprofits) or agreements with “senior executives” in a “policymaking position.”
The rule would have also required employers to provide notice to current and former
workers that their noncompete clauses are no longer in effect, thereby removing
protection for employers who need to protect trade secrets and other sensitive
information from rival companies looking to gain an advantage over their competition by use of insider information from the transitioning employee.
Karen Ensley, Board Certified Construction Law Attorney
Managing Partner
Ensley Benitez Law, PC
For more information contact info@eblawtexas.com or 469-983-6500
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