A federal judge in Texas has blocked the Federal Trade Commission’s (FTC) nationwide ban on noncompetition agreements, scheduled to take effect Sept. 4, according to the Lake Effect law firm. The judge’s ruling said the FTC lacked substantive rulemaking authority to address unfair methods of competition. Further, the judge found the rule to be “unreasonably overbroad without a reasonable explanation.”
Employers, while not now required to send out employee notices stipulated under the FTC rule, are nevertheless advised to proceed with a thorough review of current noncompete agreements and related policies, as noncompetes are still under threat from other federal and state authorities. Noncompete and nonsolicit provisions that aim to curtail the rights of nonsupervisory employees will be carefully scrutinized and potentially nullified under the National Labor Relations Act.
Several U.S. states have also completely banned or substantially restricted noncompete agreements, with some assessing fines for noncompliance.
