As of August 2024, Federal Courts in multiple states have issued rulings that challenge the FTC’s authority to implement the rule, leaving companies and workers nationwide in a state of uncertainty.
Florida Court Stays the Rule for Specific Plaintiffs
On August 14, 2024, U.S. District Judge Timothy Corrigan for the Middle District of Florida granted a motion to stay the effective date of the FTC’s rule and issued a preliminary injunction. The case, Properties of the Villages, Inc. v. FTC, represents the third challenge to the FTC’s non-compete rule. While this ruling temporarily halts the enforcement of the rule, it only applies to the plaintiff in this specific case, leaving the broader business community in legal limbo.
Texas Ruling Blocks FTC Rule
On August 20, 2024, U.S. District Judge Ada Brown for the Northern District of Texas issued a ruling barring the FTC’s non-compete rule from taking effect. The rule, originally scheduled to become law on September 4, was intended to ban nearly all non-compete agreements across the U.S. However, Judge Brown determined that the FTC lacked the statutory authority to enforce such a sweeping prohibition, calling the rule “arbitrary and capricious.”
Business groups, such as the US Chamber of Commerce, hailed the decision as a victory against government overreach, while the White House and the FTC expressed disappointment and vowed to continue supporting efforts to protect workers.
What Should Companies Do Now?
The situation remains fluid, and the final resolution may take years, as appeals and further litigation are expected. In the meantime, SL advises businesses to review their non-compete agreements and consider alternative strategies for protecting trade secrets and confidential information.