“The injunction is not a nationwide injunction. It only applies to the parties in the case before the texas court. So, it is recommended that employers do not make any changes to their noncompete and employment agreements.”
-Shruti Gurudanti, Rose Law Group partner and corporate transactions director
By CNBC
The future of a Federal Trade Commission ban on noncompete agreements, scheduled to take effect this fall, is unclear after a preliminary ruling from a federal court last week.
Nearly 1 in 5 Americans, an estimated 30 million people, are subject to a noncompete agreement, according to the FTC. The agreements prevent workers from taking a new job with competitors or starting a new business in the same industry.
The Biden administration first proposed banning noncompete agreements in January 2023. In response, the FTC received more than 26,000 comments, with 25,000 of them in favor of the rule.
Legal challenges on noncompete ban
Judge Ada Brown, a Trump-appointed federal judge in Texas, issued a preliminary order against the FTC ban last week in a lawsuit brought by Ryan LLC, a Dallas-based tax services firm. The firm uses noncompete agreements to keep competitors from hiring away its workers and to keep workers from poaching firm clients. Ryan argued the FTC overstepped its legal authority to ban noncompete agreements.
The court agreed the FTC lacks authority to make the sweeping rule and said the plaintiffs are likely to succeed on the merits of the case.
