UPDATE: US Court Issues Nationwide Prohibition Against FTC Enforcement of Non-Compete Ban

In a widely anticipated ruling, a U.S. District Court in Texas ordered last week that the U.S. Federal Trade Commission (FTC) could not enforce a rule that it had passed in April 2024 which would have largely outlawed the use of non-compete agreements against employees in the United States. The court’s order pauses, for now, enforcement of the rule which had been due to come into effect on 4 September 2024. Companies with U.S. employees can continue to operate as they have been and will no longer be required to void existing non-compete agreements or otherwise comply with the proposed FTC non-compete nationwide-ban. If you missed our earlier blogs on the now invalid rule, you can read them here: Key Upcoming Changes to Non-Compete Laws: What Steps Should Employers with US Employees Take? and here: Update: US District Court Indicates that FTC Non-Compete Ban is Likely Unlawful.

The FTC has indicated it may appeal the ruling; so, the ultimate fate of the federal rule remains unknown. For now, employers with U.S. employees should focus their compliance efforts on state laws governing enforceability of non-compete agreements, some of which impose significant constraints on the use of non-compete agreements, and should ensure that any such agreement is narrowly tailored to protect legitimate business interests.

Please contact us if we can help you navigate this or other U.S. legal issues.