On Tuesday, August 20, a Texas federal judge set aside the FTC’s “Non-Compete Rule” (the “Rule”). This decision comes just two weeks before the FTC’s nationwide ban on non-competes was set to take effect. The Court stated the FTC overstepped its authority in issuing the Rule, calling it “arbitrary and capricious” and found that the FTC’s sweeping ban on non-competes was overly broad and ignored the valid business interests non-competes serve. Many employees may now breath a sigh of relief now that the Rule is on hold indefinitely. However, the Rule is not completely out of the game just yet.
What Does This Mean For Employers?
For now, the FTC’s Rule is on hold, giving employers a break from the looming requirement to void existing non-competes and to cease entering into new ones. If you have been using non-competes to protect your business, you can keep enforcing them in accordance with state laws. Just stay alert and be prepared for any changes that might arise from subsequent rulings or appeals.
What’s Next?
This legal battle is not the end of the story. The FTC is likely to appeal the ruling and employers should watch for the Court’s final ruling on August 30, which could clarify or solidify its decision. We will monitor the situation and provide an update once that ruling is issued.
