The Federal Trade Commission (“FTC”) Final Rule banning most noncompete agreements was struck down by the United States District Court for the Northern District of Texas
On August 20, 2024, the Federal Trade Commission (“FTC”) Final Rule banning most noncompete agreements was struck down by the United States District Court for the Northern District of Texas. Notably, the Final Rule was set to take effect on September 4, 2024. The court ruled that the FTC lacked authority under the Federal Trade Commission Act for substantive rulemaking to prevent unfair competition and exceeded their authority by issuing the Final Rule. Additionally, the court held that the Final Rule is arbitrary and capricious. As a result, the court set aside the Final Rule, finding it unlawful, and prohibiting its enforcement nationwide. The FTC will likely appeal the court’s ruling.
In light of this decision, employers are not required to comply with the provisions of the Final Rule and noncompete agreements will remain lawful. As a reminder, noncompete agreements in New York state should generally be reasonable in geographical scope and time, and only be as restrictive as necessary to protect the employer’s legitimate business interests.
If you have any additional questions, please contact Sean Doolan, Esq. ([email protected]), Elena DeFio Kean, Esq. ([email protected]) or Kristin Foust, Esq. ([email protected]) at (518) 436-0751.