FTC Ban on Worker Noncompete Agreements Stricken Down

By Gordon Prince, Esq.

The U.S. Federal Trade Commission’s Final Rule—discussed in our prior articles No More Noncompetes? and Federal Courts Issue Opposing Rulings on Noncompete Agreements—set to become effective September 4, 2024, which would have invalidated almost all noncompete agreements and prohibit future ones with very limited exceptions, has been stricken down in court.

On August 20, 2024, federal District Judge Ada Brown of the U.S. District Court for the Northern District of Texas issued a Memorandum Opinion and Order and a Final Judgment ruling in favor of the plaintiffs’ motion for summary judgment finding that the FTC cannot enforce its near-total ban on noncompete agreements. The Court held the Rule is unlawful and set aside the Rule, as required under the Administrative Procedures Act, resulting in the Rule not being enforced or otherwise taking effect on September 4, 2024 or thereafter.

The FTC expressed disappointment and is considering an appeal, while cases challenging the Rule remain open in other jurisdictions. We anticipate litigation over this Rule will ultimately be appealed to the Supreme Court of the United States for a final decision. For now, the scheduled implementation of the Rule will pass by as the lawfulness of the Rule continues to be disputed.

Attorney Gordon W. Prince is a member of the Business Law Department at Gawthrop Greenwood, PC, where he focuses his practice on business and corporate law, contracts, financing and secured transactions. He was named to Best Lawyers^®: Ones to Watch 2024, Super Lawyers Rising Star, as well as Top Lawyers in Main Line Today and the Daily Local News. For more information, contact Gordon at gprince@gawthrop.com or 610-696-8225.