Texas district court sets aside FTC’s non-compete ban

The U.S. District Court for the Northern District of Texas issued a decision setting aside the Federal Trade Commission’s non-compete ban and prohibiting the FTC from enforcing the rule.

Details: Judge Ada Brown granted the Chamber of Commerce, Business Roundtable, Texas Association of Business, and Longview Chamber of Commerce Motion for Summary Judgment concerning its claims on the FTC’s Non-Compete Rule, which would have made most non-compete agreements unenforceable. The Court’s order means that the rule “shall not be enforced or otherwise take effect on its effective date of September 4, 2024, or thereafter.”

More: The court sided with the Chamber because “there was a substantial likelihood that plaintiffs would succeed on the merits—including the conclusions that the FTC exceeded its statutory authority, and the rule is arbitrary and capricious.”

Background: The FTC rule stated that noncompete agreements are an unfair method of competition and banned them. The rule would not have applied to bank employees because banks are exempt from FTC jurisdiction, but it may have applied to the employees of some bank affiliates, including bank holding companies and subsidiaries like mortgage companies that are not directly employed by the bank.

ICBA View: ICBA signed a joint letter arguing, among other things, that FTC lacks the statutory authority to issue the rule because the FTC Act does not authorize the agency to adopt generally applicable substantive rules defining unfair methods of competition.