On August, 20, 2024, the Northern District of Texas handed down a much anticipated decision regarding the Federal Trade Commission’s (FTC’s) impending ban on most non-compete agreements. The FTC’s rule was scheduled to become effective on September 4 (access the FTC’s announcement through this link). Judge Ada Brown ruled that the FTC lacked the statutory authority to adopt such a rule. Additionally, Judge Brown concluded that even if the FTC had such authority, the FTC’s failure to provide the court with sufficient evidence or a reasoned basis for such a broad prohibition rather than a focused approach toward certain types of non-compete agreements rendered the rule arbitrary and capricious. Accordingly, Judge Brown blocked implementation of the rule. Judge Brown’s ruling is not limited to the specific parties—the FTC’s rule is completely blocked from taking effect as scheduled.

The court’s decision is subject to an appeal, and the FTC is likely considering its options. For now, businesses that use non-competes can continue to act consistent with applicable state law. However, the FTC’s attempted prohibition may signal a warning to reconsider whether existing non-compete agreements may require some reworking before an appeal or another attempt proceeds.

If you have any questions regarding this alert, please contact Chris Bailey, Amy Blaisdell, Joe Brennan, or Jeff Dunlap.

The information provided in this client alert speaks only to the information and guidance we have available as of the date of publication and is subject to change. This legal update was created by UB Greensfelder LLP, and is not intended as a substitute for professional legal advice. Receipt of this client alert, by itself, does not create an attorney client relationship.