Judge’s Ruling a Win for Businesses

On August 20, 2024, Judge Ada Brown from Texas ruled that the Federal Trade Commission
(“FTC”) Ban on Non-Compete Agreements was arbitrary and capricious and thereby, invalidated
the rule. In an additional win for businesses nationwide, her decision applies to all non-compete
agreements, not just those in Texas. She was set to make a ruling on or before August 30,
2024, so this early ruling was, again, a win for businesses. The rule was set to take effect on
September 4, 2024. The FTC has indicated that it will appeal this decision.

There is sister litigation pending in Pennsylvania where the initial ruling by the Judge was the
complete opposite of Judge Brown in Texas. The initial Pennsylvania ruling was that the FTC
was within its powers to enforce the rule. There is another case pending in Florida as well and
arguments were just heard in that case in early August. If disparate decisions are reached in
Florida and Pennsylvania which conflict with the Texas decision, further appeals will be likely
with the case possibly ending in the US Supreme Court. But, all of this will take time.

The FTC and Department of Labor (“DOL”) issued a joint Memorandum of Understanding to
challenge non-compete agreements and has filed suit in some cases actually suing businesses
for having such agreements. Several states have also passed non-compete litigation and those
laws will remain in effect. Non-compete litigation is very fact specific and depends on the state
law, language of the agreement as well as court interpretations of non-compete laws. They
must be carefully drafted to be enforceable particularly in this era of attacks on such restrictions.