A Texas federal judge recently upheld a challenge to the Federal Trade Commission’s sweeping ban on non-compete agreements, blocking the new rule from taking effect as planned on September 4th.
Judge Ada Brown of the U.S. District Court for the Northern District of Texas ruled that the FTC lacked the authority to issue the substantive rule that would have barred employers from implementing or enforcing nearly any non-compete agreement. Judge Brown temporarily blocked the rule in July, and on August 20th, issued a final decision rendering the injunction permanent and nationwide in scope.
The FTC, in response, may appeal the decision to the 5th Circuit Court of Appeals, but based on that Court’s reputation, the agency is unlikely to find a warm reception. Likewise, a further appeal to the conservative US Supreme Court holds an even slimmer chance of success.
For now, employers may continue to use and enforce properly drafted non-competition agreements, so long as those agreements satisfy any state law requirements. Washington is one of those states that has implemented specific rules and regulations regarding these agreements, and employers must ensure that their non-competes satisfy those requirements before implementing or taking enforcement action. See our prior member alert on Washington State non-competition agreements here.