Earlier this year, the Federal Trade Commission (“FTC”) adopted a new rule
that prohibited employers from imposing non-competition restrictions on their
employees. According to the FTC, such provisions were an unfair restraint on
competition that violated antitrust laws and suppressed employees’ pay and
freedom to change employment. The rule was to take effect on September 4, 2024.
Since the adoption of the rule employers and employees have wondered about the
future of non-competition clauses.

On August 20, 2024, a federal district court judge in Texas ruled that the
FTC lacked the authority to ban practices it deemed unfair by adopting broad rules.
According to the court, the FTC “exceeded its statutory authority” by issuing a
“sweeping prohibition” against all non-competition provisions. The Texas district
court ruling followed a similar determination by a Florida court which prohibited
enforcement of the FTC rule in favor of a specific employer. However, a
Pennsylvania court recently ruled that an employer failed to show “irreparable
harm” if its non-compete clause was not enforced.

In light of the Texas and Florida rulings the enforceability of the FTC rule is
in doubt. However, what is certain is that the enforceability of non-compete
provisions addressed by the FTC rule will be the subject of further appeals and
perhaps find its way to the United States Supreme Court.

The attorneys at the Law Offices of Damian Christian Shammas, LLC are here to answer any questions you may have.