The FTC recently appealed a Texas federal court’s decision that blocked its proposed noncompete ban. On October 18, 2024, the agency filed a notice of appeal with the U.S. Court of Appeals for the Fifth Circuit, contesting the August 20 ruling. The district court had ruled that the FTC lacked the authority to issue the ban and deemed the rule "arbitrary and capricious." As a result, the court’s judgment currently prevents the FTC from enforcing the ban.

Overview of the Proposed Noncompete Rule

The FTC’s final rule, approved in April 2024, aims to eliminate nearly all noncompete agreements between employers and employees. The rule prohibits employers from entering into noncompetes with most workers and requires them to rescind existing agreements, except in specific situations. 

Next Steps for Employers

The appeal sets the stage for ongoing legal battles, with the case now moving to the Fifth Circuit. Employers should stay informed about the legal developments and focus on complying with state law concerning restrictive covenants. In the meantime, reviewing and refining existing noncompete clauses and considering alternative agreements like confidentiality or non-solicitation clauses may be prudent.

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