A Federal Court Orders That the FTC Non-Compete Ban Shall Not Take Effect Across US
By A federal district court recently ruled that the Federal Trade Commission’s ban on employment-based non-competes is unlawful and therefore shall not be enforceable or otherwise become effective. The FTC reportedly will consider appealing that decision.[1] The FTC has not yet filed a notice of appeal, which is due on or before Monday, October 21, 2024.[2]
Earlier this year, the FTC voted to enact Part 910 of Title 16 of the Code of Federal Regulations—a federal regulation banning most employment-based non-competes.[3] That rule was set to become effective on September 4, 2024.[4] But, based on summary judgment entered in the Northern District of Texas, Part 910’s non-compete ban and notice requirements will not take effect on September 4, 2024.[5]
The Northern District of Texas Opinion
The opinion supporting summary judgment declares that the FTC did not have statutory authority to enact Part 910 and that the FTC’s non-compete ban is “arbitrary and capricious.” According to the court’s reasoning, neither Section 6(g) nor Section 18 of the FTC Act provide a basis for the FTC to substantively regulate “unfair methods of competition.”[6] The decision’s statutory authority analysis ends there, leaving other arguments like the “major questions” doctrine unaddressed.[7] The court further determined that the FTC’s non-compete ban was “arbitrary and capricious,” and therefore illegal, because the ban is “unreasonably overbroad.”[8] According to the decision, the FTC enacted the ban based on inapposite evidence and without consideration of appropriate alternatives.[9] Having determined that Part 910 is illegal, the court held that Fifth Circuit precedent interpreting the Administrative Procedures Act requires a nationwide set aside of the illegal agency action.[10] Thus, because the FTC enacted the ban without proper evidence, consideration, or authority, the court ruled that Part 910 shall not become effective.[11]
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Madisyn K. Ivey has joined Bradley Arant Boult Cummings LLP. She practices construction law. She graduated from Georgetown University Law Center in 2020, where she was the Georgetown University Law Center winner of the Iron Tech Lawyer Invitational and a global finalist for the CALI Award. She holds a bachelor’s degree in journalism and mass communications, magna cum laude, from the University of South Carolina.
Deborah B. Andrews has joined Fox Rothschild. Andrews practices as of counsel in the Employee Benefits & Compensation Department and has offices in both Raleigh and Washington, D.C. Her practice is focused on employee benefits, executive compensation and applicable tax compliance matters. Andrews is a certified public accountant in North Carolina. She holds an LL.M. in taxation from Georgetown University Law Center, a J.D. from the University of North Carolina School of Law and a B.A., with honors, from North Carolina State University.
Morgan McCall Reece has joined the firm’s Greensboro office. She practices of counsel in the Litigation Department and Appellate Practice Group. She previously served as an Assistant U.S. Attorney and state prosecutor. Reece defended businesses and individuals in white-collar criminal cases and regulatory proceedings. She has successfully argued cases before the U.S. Court of Appeals for the 4th Circuit. She graduated from Wake Forest University School of Law and holds a bachelor’s degree from the University of Virginia.
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