216-447-1551
info@rbslaw.com
FTC’s Noncompete Ban Blocked Nationwide
Judge Ada Brown of the United States District Court for the Northern District of Texas issued a ruling yesterday setting aside the Federal Trade Commission’s near absolute noncompete ban. Judge Brown found that the FTC lacks substantive rulemaking authority relating to unfair methods of competition, exceeded its statutory authority and that the ban was arbitrary and capricious which required her to set aside the rule in its entirety.
The ban was set to take effect nationwide on September 4, 2024 and would have required all employers to rescind nearly all existing noncompete agreements and prohibited all new noncompete agreements. Judge Brown previously issued a temporary injunction of the rule relating only to the named plaintiffs in the Texas case but yesterday’s order applies nationwide, sets aside the ban and “shall not be enforced or otherwise take effect on September 4, 2024, or thereafter.”
It is widely expected that the FTC will appeal Judge Brown’s order to the Fifth Circuit Court of Appeals. However, such an appeal would delay the September 4, 2024 effective date of the ban. Even if the Court of Appeals overturns yesterday’s order, it would likely be months, and potentially more than a year, before any such ruling would be issued.
In the meantime, there are other cases that are also making their way through federal courts in Florida and Pennsylvania. In the Florida case, the judge ruled that the FTC rule is likely to not be upheld after further proceedings and granted a preliminary injunction, but limited it to only the named plaintiff in Florida. In the Pennsylvania case, the court found that the FTC rule would likely be found to be valid and denied a local tree company’s request for temporary injunction. As of this date, both of these cases are continuing and we are waiting to see what, if any action the judges will take in light of the yesterday’s order.
The effect of yesterday’s court order means that employers continue to retain the discretion to decide when and with whom to enter into noncompete agreements. In Ohio, noncompete agreements can be enforced against employees provided the restrictions are necessary to protect the employer’s legitimate business interests, do not impose an undue hardship on the employee and do not cause harm to the public. In conjunction with and/or separate from a noncompete agreement, employers often utilize nondisclosure agreements and non-solicitation agreements. The attorneys at Ross, Brittain & Schonberg are available to help employers navigate these ever-evolving issues in order to ensure employer interests are protected. Please reach out to RBS with any questions and for review of your noncompete, nondisclosure and non-solictation agreements.