Ban on non compete agreements on hold by Federal judge

At the end of August 2024, a Federal judge from Texas put a hold to all the ban on non compete agreements.

As you might remember, the Federal Trade Commission released a nationwide ban on noncompete agreements on April 23rd, 2024 as reported in our previous blog post from early May 2024 – FTC implementing a ban on noncompete agreements to be in effect in August 2024. As mentioned in the ABC article, “… An estimated 30 million Americans — 1 out of every 5 workers — are employed with noncompete agreements in industries ranging from tech to fast food. The FTC argues the agreements stifle workers’ ability to switch jobs and earn higher wages.”

The U.S. District Judge Ada Brown from Texas on the lawsuit filed by the U.S. Chamber of Commerce and a Texas tax firm, which argued that the rule was too broad and that the FTC overstepped its authority. The judge with her decision deemed that the Federal Trade Commission “… does not have the authority to ban practices it deems unfair methods of competition by adopting broad rules.” Note that this judge had already temporarily blocked the rule back in July 2024 (also, there were other cases open on different Courts on this matter, one Federal judge in Florida deemed the ban likely invalid, while one judge in Philadelphia concluded that noncompetes were virtually never justified).

It is also relevant to consider how the Court does not have to follow the interpretation of any governmental agency, especially after the recent case Loper Bright Enterprises v. Raimondo, that overturned Chevron USA and requires independent judgement from the Court as mentioned in our previous blog – Never ending rules and compliance requirements for businesses

We will keep you informed on the futures updates on this topic as it might impact any of your current and future employment agreements.

ABC News article – FTC ban on worker noncompete agreements blocked by federal judge

CNN Business article – US judge strikes down Biden administration ban on worker ‘noncompete’ agreements

Reuters article – US judge strikes down Biden administration ban on worker ‘noncompete’ agreements