Legislative Alert – Federal Court Issues Preliminary Injunction as to FTC Non-Compete Ban

The Federal Trade Commission (“FTC”) passed a rule resulting in a nationwide ban on non-compete provisions in employment or independent contractor agreements. This rule is set to go into effect on September 4, 2024. However, on July 3, 2024, a federal court in Texas issued an opinion that the FTC lacked the substantive rulemaking authority to issue such a nationwide ban of non-compete provisions. The court issued a preliminary injunction in the FTC’s enforcement of this rule BUT this preliminary injunction only applies to the plaintiffs named in the lawsuit. However and importantly, the court indicted that the court will consider if it is warranted for a nationwide preliminary injunction to be enacted. The court is aware of the September 4, 2024 deadline and intends to issue an updated ruling toward the end of August 2024.

Even if the court issues a permanent ruling that the FTC’s ban on non-compete provisions in employment and independent contractor agreements is unenforceable, workers are now hyper-sensitive to this issue. I believe it is important for companies to review their hiring procedures in order to determine if non-competition restrictions are truly needed to prevent unfair competition when a worker leaves or if fairly worded non-solicitation and confidentiality provisions will be sufficient to protect the company’s business.

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Please look for future updates as the court case progresses.

Do not hesitate to be in contact if you would like to further discuss this non-compete issue or any other business issue that you may be dealing with.

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Chris Corpus

Founding Partner at Corpus Law Inc

This article does not provide legal advice or create an attorney-client relationship. If you have any questions or would like to learn more about this topic or if you have other legal questions, do not hesitate to contact Chris Corpus, Esq. of Corpus Law Inc at 216-973-2475. Copyright Christopher A. Corpus 2024.