Early September compliance date is blocked.
In a decision that was widely anticipated before the looming Sept. 4, 2024, deadline, the United States District Court for the Northern District of Texas has invalidated the Federal Trade Commission’s nationwide ban on non-compete clauses in employment contracts and other agreements. Most importantly, the court order prohibits the FTC from enforcing this ban nationally for any employer as of the August 20th publication date.
The district court determined that the FTC acted to implement the rule without statutory authority conferred by Congress, in violation of the Administrative Procedure Act. The FTC had argued that its ability to regulate non-compete agreements flowed from the FTC act itself that empowered it to “prescribe rules defining with specificity acts or practices that are unfair or deceptive.”
The FTC will likely appeal the district court’s decision to the U.S. Court of Appeals for the Fifth Circuit, and, if necessary, to the U.S. Supreme Court. In other decisions from this past session, the Supreme Court has taken a dim view of federal agencies that exercise regulatory authority that has not been explicitly authorized by Congress.
Learn more in these articles on the FTC ban as well as what the ban means for your business.
