FTC Noncompete Rule Struck Down Nationwide

On Tuesday, August 20, 2024, the United States District Court for the Northern District of Texas entered an order preventing the FTC’s rule on noncompetes from going into effect nationwide. For the time being, employers do not need to comply with the FTC’s rule, which was scheduled to go into effect on September 4, 2024.

As we described here, the Northern District of Texas preliminarily enjoined the FTC’s rule in July, but only as to the plaintiffs in that case. On August 20, the court issued its final ruling on the merits. In a 27-page opinion, Judge Ada Brown held that the FTC lacked the statutory authority to issue the rule and that, even if the FTC had authority to issue the rule, the rule is arbitrary and capricious. The court accordingly “[held] unlawful” and “set aside” the rule. Unlike the court’s prior preliminary injunction, the court’s August 20 order has a nationwide effect.

An appeal from the FTC is likely, and lawsuits challenging the FTC’s rule in Pennsylvania and Florida remain pending. We will continue to provide updates as developments unfold. If you have any questions, contact your Stites & Harbison attorney.