The Federal Trade Commission’s (FTC) efforts to ban noncompete agreements continues. This past weekend, on October 18, 2024, the FTC filed a notice of appeal challenging the August 2024 ruling by a US District Court judge in Texas, which effectively blocked the final rule that would implement the Commission’s noncompete ban. In her ruling, Texas Judge Ada Brown stated that the FTC had exceeded its statutory authority, and that “the Commission’s lack of evidence as to why they chose to impose such a sweeping prohibition … instead of targeting specific, harmful non-competes, renders the Rule arbitrary and capricious.”
In its original Rule approved in April of this year, the FTC described noncompetes as an “exploitative practice” that prevent workers from starting new businesses or switching jobs, effectively forcing them to stay with their current employer. It leaned heavily on language from the FTC Act, specifically citing “unfair method of competition” as the basis for the violation.
This final ruling does not prevent the FTC from prohibiting noncompetes or delivering enforcement actions, but it must do so on an individual, case-by-case basis. The FTC’s proposed noncompete ban remains enjoined for now, and its appeal will be considered by the Fifth Circuit. Analysts expect the issue will eventually be presented to the US Supreme Court.