WHAT’S NEW: On August 20, 2024, Texas-based U.S. District Court Judge Ada Brown, blocked the Federal Trade Commission’s non-compete ban from taking effect nationwide.
Judge Ada E. Brown ruled that the FTC didn’t have the authority to issue such a broad action and that the rule was arbitrary and capricious.
“The Commission’s lack of evidence as to why they chose to impose such a sweeping prohibition ... instead of targeting specific, harmful noncompetes, renders the rule arbitrary and capricious,” Brown wrote.
The FTC proposed the rule in April, stating that noncompete clauses suppress wages and constitute an unfair method of competition. FTC spokesperson Victoria Graham said the agency was disappointed with the block and is “seriously considering a potential appeal.” She added that the “decision does not prevent the FTC from addressing noncompetes through case-by-case enforcement actions.”
WHAT IT MEANS: Judge Brown's ruling, issued in Ryan, LLC v. FTC, prevents the non-compete ban from taking effect on September 4, 2024. Based on this ruling, the non-compete ban cannot be enforced or take effect nationwide. The FTC will likely appeal this ruling, but that process may take years. Non-compete agreements can still be challenged on a case-by-case basis. This ruling has no impact on any state non-compete bans.
WHAT EMPLOYERS SHOULD DO: For now, existing non-compete agreements remain enforceable, and employers may enter into new non-competes. Employers should still review existing non-compete agreements and consider using other restrictive covenants to protect confidential or proprietary business information.
Please reach out to your SynchronyHR Human Resources Partner if you have any questions concerning this alert or other H.R.-related matters.
*This article does not constitute legal advice, and does not address state or local law.