The FTC’s recent non-compete rule banning the use of non-competition agreements with employees which was scheduled to take effect this week has been struck down by a federal judge in Texas. Not only was the new FTC rule expected to prohibit non-compete agreements with new employees, it was also expected to sunset non-competes with current employees.
The FTC’s rationale for the rule is that non-competes harm competition by preventing employees from seeking better employment opportunities as well as inhibiting employers from hiring the best talent. However, Judge Ada Brown, a federal judge sitting in the Northern District of Texas, entered an Order on August 20th that the FTC non-compete rule shall not be enforced or take effect as scheduled on September 4th. Judge Brown held that the proposed FTC non-compete rule is “arbitrary and capricious because it is unreasonably overbroad without a reasonable explanation.” It is expected that the FTC will appeal this decision, so this matter is far from over for employees or employers.
For more information on the ruling or to assess your existing employee agreements, contact Burkhalter Law.
