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ARTICLE · 27 AUGUST 2024

FTC Noncompete Ban Killed Before Taking Effect

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The FTC's ban on noncompete agreements has been struck down for all employers nationwide just two weeks before it was to take effect.

United StatesEmployment and HR
Thomas J. "Tommy" McGoey, II
Thomas J. "Tommy" McGoey, II
Ellen George
Ellen George
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The FTC's ban on noncompete agreements has been struck down for all employers nationwide just two weeks before it was to take effect. The key points regarding the Texas federal district judge's rulings are:

  • All existing and new noncompete agreements consistent with state law are still effective.
  • Employers will not have to comply with the FTC's ban by September 4, 2024, as originally scheduled.

The court struck down the rule for two reasons. First, the FTC exceeded its statutory authority in promulgating the substantive rule because Congress only authorized it to issue procedural, not substantive, rules to address unfair methods of competition. Second, the rule was arbitrary and capricious because it was unreasonably overbroad without a reasonable explanation. Importantly, the court's ruling applies to all employers across the country.

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