Federal Court overturns FTC’s non-compete ban
The judge ruled that the FTC exceeded its statutory authority in making the Rule, and that the Rule violated the Administrative Procedures Act because it was arbitrary and capricious. The judge held that the FTC exceeded its statutory authority in making the Rule, and that the Rule violated the Administrative Procedures Act because it was arbitrary and capricious.
As we explained in our prior post, the Rule would have rendered most noncompete agreements unenforceable, and imposed specific notice requirements on employers for employees with existing noncompetes. For now, the Rule is effectively blocked
nationwide, pending a potential appeal by the FTC. At this time, employers can continue to utilize and seek enforcement of their otherwise enforceable noncompetes without regard for the FTC’s Rule.Regardless of the viability of the FTC Rule, noncompetes continue to face heavy scrutiny from lawmakers and some courts across the country. Last month, Pennsylvania placed new restrictions on noncompetes. Both Republican and Democratic legislators in the U.S. Senate, and House of Representatives, re-introduced two separate bills last year that would have imposed significant limitations on the enforceability of the noncompetes. Now that the FTC Rule has been struck down, these bills could be revisited.
Employers who utilize noncompetes should stay informed on the latest developments in the ever-changing noncompete landscape. We will continue to track and provide updates regarding the FTC’s possible appeal of the court decision to set aside the rule on noncompetes.
