By: David S. Levine
On August 20, 2024, a Texas federal district court invalidated—on a nationwide basis—the Federal Trade Commission’s rule (the “FTC Rule”) banning most non-competes. Here are the key takeaways:
- Reasoning: The Texas court invalidated the FTC Rule on two grounds. In particular, the Court ruled that the FTC (1) “lacks statutory authority” to promulgate the FTC Rule and (2) that the FTC Rule is “arbitrary and capricious.”
- Nationwide Remedy: After discussing these grounds, the Court issued the remedy: setting aside the FTC Rule on a “nationwide” basis as to all “persons in all judicial districts.” Accordingly, the Court wrote, the FTC Rule “shall not be enforced or otherwise take effect on its effective date of September 4, 2024, or thereafter.”
- Notices: For many employers, the most pressing question has been whether to issue notices—discussed in our prior linked article below—to their employees affected by the FTC Rule. Given the recent decision, employers need not issue any notices or take other steps to comply with the FTC Rule at this time.
- Going Forward: The Texas decision will not be the last word on the FTC Rule. The FTC will likely appeal the ruling, and other cases challenging the FTC Rule are also pending in Florida and Pennsylvania. Companies should stay tuned for further developments on this front.
We are following these developments closely and are ready to assist companies with any questions. Please contact Steve Brenneman, Kelly Smith-Haley, David Levine, or the Fox Swibel attorney with whom you regularly work to discuss these issues.
This article contains material of general interest and should not be construed as legal advice or a legal opinion on any specific facts or circumstances. Under applicable rules of professional conduct, this content may be regarded as attorney advertising.
See the preceding article here: The FTC Non-Compete Ban: What Employers Should Know (April 24, 2024).
About the Author
David Levine is an associate in the Firm’s Employment Law and Litigation Groups. David’s practice focuses on representing clients in a wide range of labor and employment matters, as well as other business disputes. As part of his litigation practice, David regularly defends employers in class, collective, and individual actions involving claims under the FLSA, Title VII, ADA, and other federal and state statutes. David also often litigates individual and class actions involving data privacy issues, in particular cases under the Illinois Biometric Information Privacy Act (BIPA). He practices in state and federal courts and before administrative agencies such as the EEOC, DOL, and DOJ.