Non-Competes, The FTC And The Latest Litigation

The Federal Trade Commission's rule banning nearly all non-compete agreements with workers was blocked, nationwide, by a Texas federal court on August 20, 2024. The court's decision found that the rule exceeded the FTC's statutory authority and that it was arbitrary and capricious. The non compete rule is now entirely set aside and will not take effect on September 4, 2024, as was previously anticipated.

Specifically, the Texas court's opinion found that (i) the statutory provision invoked by the FTC to issue the rule, Section 6(g) of the FTC Act, authorized only procedural rulemaking and not substantive rulemaking like the non-compete ban; and (ii) the rule was arbitrary and capricious under the Administrative Procedure Act, 5 U.S.C. § 706(2), because the FTC disregarded evidence of positive benefits of non-compete agreements and failed to consider less restrictive alternatives to a sweeping nationwide ban. In an earlier ruling in the same case, Ryan LLC et al. v.