On August 20, the U.S. District Court for the Northern District of Texas set aside the finalized Federal Trade Commission (FTC) regulation banning non-compete agreements. In its ruling, the Court concluded that the FTC had not provided sufficient evidence to justify a rule banning all non-competes. The court found the overly broad rule “arbitrary and capricious” and thus declared it unlawful. This decision invalidates the FTC’s non-compete ban nationwide.

The ban was scheduled to become effective on September 4, 2024. The FTC is expected to appeal the decision.

If the validity of the final rule is restored, the rule would prohibit businesses from entering into non-compete agreements or including non-compete clauses in agreements they enter into with their workers. The rule would render unenforceable clauses or agreements that “function[s] to prevent a worker” from looking for or accepting work that would be in competition with the worker’s employer or from operating a business that would compete with the worker’s employer.

PIA appreciates the Northern District of Texas for its careful analysis of the ban’s legality and supports its decision in setting aside the FTC’s rule.