To Our Clients and Friends, 

On April 26, 2024, we notified you that the Federal Trade Commission (FTC) issued a final rule banning non-compete agreements in the United States for most American workers. It was scheduled to take effect on September 4, 2024. This impactful rule superseded all state laws on non-compete agreements.

As stated in our earlier notice, lawsuits challenging the final rule and the FTC’s authority to adopt the final rule were filed within hours of the FTC's announcement.

This week, a federal judge in Texas determined that the FTC cannot enforce its near-total ban on non-compete agreements and concluded that the final rule is “unreasonably overbroad without a reasonable explanation.” The Court further ruled that the ban was “arbitrary and capricious,” an unauthorized overreach by the FTC.

Bottom line: Existing non-compete agreements continue unaffected.

Is this the end of the story? No way. The FTC can appeal or modify its rule and try again.

Practically speaking: The judicial climate for evaluating non-compete agreements seems harsher than before—and some states have banned non-compete agreements except in very limited circumstances. If you are wondering whether your business’s employment agreements will pass muster in court—or if you are subject to a non-compete agreement and want to know how courts may evaluate it—please contact me. I would be happy to evaluate the agreement and assist with modifications if needed. 

We will keep you posted on any developments!

If you have any questions about these new rules and how they affect your business, we would be happy to discuss them with you and assist you through the process. For more information, please contact the GCT attorney with whom you work.