Advocacy News – Aug. 21, 2024
A federal judge in Texas blocked a new rule from the Federal Trade Commission (FTC) that would have banned essentially all noncompete agreements between employers and employees.
What happened: The ruling by the federal judge in Texas granted a motion for summary judgement filed by the U.S. Chamber of Commerce and other plaintiffs, and rejected the FTC’s own petition for a judgement in its favor. The judge concluded that the FTC “exceeded its statutory authority” in making the rule, saying it was “arbitrary and capricious.” The judge also concluded that the rule would cause irreparable harm.
Why it matters: The ruling is good news for employers nationwide. Noncompetes are a useful tool in situations in where employees have access to trade secrets, confidential or proprietary information that could harm the business if disclosed to a rival.
What’s next: As a result of the court’s decision, the FTC won’t be able to enforce its rule, which was set to go into effect Sept. 4, according to the judge’s ruling. While the decision doesn’t prevent the FTC from addressing noncompete agreements on a case-by-case basis, it concludes the first chapter of the legal fight over this rule. It is possible that the FTC could appeal.
Go deeper: Read more about the FTC’s rule here.