Court Issues Injunction against FTC's Non-Compete Ban

On July 3, 2024, a federal judge in Texas issued an injunction preventing the Federal Trade Commission (FTC) from enforcing its rule banning non-compete agreements, preventing the rule from taking effect in September while the court considers if the FTC has authority to issue the rule.  The judge stated: "The court concludes the text and the structure of the FTC Act reveal the FTC lacks substantive rulemaking authority concerning unfair methods of competition.  The court concludes the Commission has exceeded its statutory authority in promulgating the non-compete rule, and thus plaintiffs are likely to succeed on the merits."

Editor's Note:  It should be noted that the preliminary injunction does not apply to all employers, but only the parties to the case.  Although there is no nationwide preliminary injunction, the court sends a strong message that the FTC rule is unlikely to be upheld in court.  This result was anticipated by the FTC's Republican Commissioners, who voted against the rule, arguing in dissenting statements that the ban exceeds the agency's authority and shows an effort by the "administrative state" to make new law without Congressional approval.

This article is part of our August 2024 Newsletter. 

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