On July 3, 2024 a Texas federal judge put the Federal Trade Commission’s (FTC) noncompete ban on hold by issuing a preliminary injunction. This decision comes as part of the ongoing legal challenge against the FTC’s rule, which seeks to ban nearly all noncompete agreements in the United States.
The lawsuit argues that the FTC overstepped its authority by enacting this rule. The plaintiffs claim that the FTC lacks the substantive rulemaking power to impose such a ban and that noncompete agreements, in fact, promote competition and innovation by protecting intellectual property and incentivizing investment in employee training.
The FTC maintains that its rule is within its mandate to prevent unfair methods of competition and argues that noncompete agreements hinder competition and harm workers by limiting their mobility and potential earnings.
The injunction means that the FTC’s rule, which was set to take effect on September 4, 2024, will not be enforced until the court makes a final decision on the legality of the ban. This pause provides temporary relief for businesses that utilize noncompete agreements and sets the stage for further legal battles over the FTC’s regulatory authority and the broader implications for employment practices across the country.
For questions, contact any member of Ryan Swanson’s Employment Rights, Benefits & Labor group.
