The District Court for the Northern District of Texas issued a decision striking down the Federal Trade Commission’s rule banning non-compete agreements, which was set to take effect on September 4, 2024. In a decision authored by Judge Ada Brown, the Court held that the ban exceeded the scope of the FTC’s powers and was arbitrary and capricious due to its overbreadth and lack of justification. This development clears up prior confusion stemming from previous rulings that only prevented enforcement of the ban against specific parties, and it eliminates the federal non-compete ban for all employers in the United States. Although the decision is appealable, it is unlikely that the FTC will pursue this course of action, as any appeal would be heard by the Fifth Circuit, and potentially by the Supreme Court of the United States, both of which are expected to be hostile to the ban. Employers should return to their prior practices related to non-compete agreements, keeping in mind that state laws remain unaffected by the Northern District of Texas’s decision, so they are still subject to those laws where applicable.

If you have any questions, do not hesitate to contact a local Stokes Wagner attorney.

For a printable PDF of this article, Click here.

THIS DOCUMENT PROVIDES A GENERAL SUMMARY AND IS FOR INFORMATIONAL/EDUCATIONAL PURPOSES ONLY. IT IS NOT INTENDED TO BE COMPREHENSIVE, NOR DOES IT CONSTITUTE LEGAL ADVICE. PLEASE CONSULT WITH COUNSEL BEFORE TAKING OR REFRAINING FROM TAKING ANY ACTION.