Legal Challenges Put FTC’s Non-Compete Ban on Hold

---

The Federal Trade Commission’s (FTC) final rule ban on non-compete agreements was set to take effect on September 4, 2024. However, its future is now uncertain following significant legal challenges.

On August 20, 2024, Judge Ada Brown of the U.S. District Court for the Northern District of Texas issued a permanent injunction against the FTC’s rule, halting its enforcement nationwide. The court ruled that the FTC overstepped its authority and criticized the rule as overly broad and unjustified.

This decision, which follows earlier legal actions, including a preliminary injunction in the Middle District of Florida and a conflicting ruling in the Eastern District of Pennsylvania, underscores the complexity of the legal situation and the varying interpretations of the FTC’s authority.

Despite the setback, the FTC is likely to appeal the Texas ruling. However, a resolution is unlikely before the original effective date, even if an appeal is filed. Employers currently face legal uncertainty regarding the use of non-compete agreements. Although they remain permissible, the legal landscape could shift based on the outcomes of ongoing litigation and potential appeals.