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In a win for ABC members, on Aug. 20, the U.S. District Court for the Northern District of Texas blocked the Federal Trade Commission from implementing its rule to ban noncompete agreements. The court found that the FTC lacked statutory authority to promulgate the rule and that the rule is arbitrary and capricious. This means the rule will not be enforced or otherwise take effect on Sept. 4, 2024. According to media reports, the FTC is considering appealing the decision. To learn more about the decision, read ABC’s general counsel Littler Mendelson’s analysis.
ABC is extremely pleased with the court’s decision and has consistently stated that ABC members have valid business justifications for utilizing noncompete agreements, such as protecting confidential information and intellectual property. The new rule would have had a harmful effect on member companies as well as their employees, forcing employers to rework their compensation and talent strategies.
On July 3, the same Texas court issued a limited preliminary injunction and stay of the FTC’s rule. On May 14, ABC joined a broad group of trade associations in filing an amicus brief in support of the plaintiffs’ request for injunctive relief against the FTC’s final rule to ban noncompete clauses.
Following the FTC’s vote on April 23 to finalize the ban on noncompetes rule, ABC issued a release opposing the rule, stating, “The final rule to ban all noncompete agreements nationwide—except existing noncompetes for senior executives—is a radical departure from hundreds of years of legal precedent. Ultimately, this vastly overbroad rule will invalidate millions of reasonable contracts—including construction project contracts—around the country that are beneficial for both businesses and employees.”
In April 2023, ABC submitted comments in opposition to the FTC’s unprecedented proposal to ban noncompetes. ABC also joined the U.S. Chamber of Commerce and 280 business groups in submitting comments urging the FTC to rescind the proposed rule.
Continue to monitor ABC’s Newsline for further updates.
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