FTC Challenges Noncompete Ban Decision

The Federal Trade Commission filed notice Oct. 18 that it will appeal a court ruling blocking the agency’s controversial rule banning most noncompete agreements.

The U.S. District Court for the Northern District of Texas issued a permanent injunction Aug. 20 against the ban, two weeks before it was scheduled to take effect.

U.S. District Judge Ada Brown determined that the FTC exceeded its authority with the wide-ranging rule, which banned for-profit employers from issuing any new noncompete agreements.

The rule, which the FTC approved 3-2 in April, also made almost all existing agreements unenforceable after the Sept. 4 effective date.

The rule remains blocked pending the appeal. The issue is expected to eventually come before the U.S. Supreme Court.

The FTC also appealed a preliminary injunction ruling by the U.S. District Court for the Middle District of Florida that found the rule was likely improper as the agency failed to “point to clear congressional authorization.”

Noncompete agreements are banned in California, Minnesota, Oklahoma, and North Dakota, and at least a dozen other states have laws limiting their use.

A bill banning a range of noncompete agreements stalled in the Connecticut legislature during the 2024 session after gaining approval from the Labor and Public Employees Committee.