A federal judge in TX has enjoined the Federal Trade Commission’s (FTC) non-compete ban nationwide. This means the ban will not take effect on September 4, 2024, for any employer.
The Biden administration tasked the FTC with creating limitations on worker non-compete agreements. In April of this year, the FTC published a rule effectively banning all non-competes. However, there were multiple challenges. A federal judge in TX ruled on August 20, 2024, the FTC doesn’t have the authority to issue such a ban. Judge Ada Brown stated, “The Commission’s lack of evidence as to why they chose to impose such a sweeping prohibition … instead of targeting specific, harmful non-competes, renders the rule arbitrary and capricious.”
However, don’t mass produce or laminate your non-compete agreements just yet, we may not have heard the last from the FTC on this subject. They do have the ability to appeal and are likely considering that as a viable option. Another option they could choose is to propose a rule limiting non-compete terms (like many states currently do), as opposed to a complete ban.
It’s critical to keep in mind there are still limitations at the state level on the scope of non-compete agreements. NC not only requires a non-compete to have a reasonable time limit and applicable geographical location, but the worker must also receive some type of consideration for signing – for example, upon hire or a bonus (if already employed).
Needless to say, non-competes are still complicated. Employers might consider a well-drafted confidentiality and non-solicitation agreement instead. Catapult’s New Hire and Onboarding Toolkit contains a Confidentiality Guide as well as state-specific templates for NC, SC, and VA.
Catapult HR Advisors and the Employment Attorneys through our Employment Law Advice plan are available to discuss your ongoing noncompete strategy and review any existing documents.
