Federal Judge in Florida Rules Against FTC Noncompete Ban

A federal judge in Florida ruled Aug. 14 against the Federal Trade Commission’s (FTC’s) proposed ban on most noncompete agreements.

Chief Judge Timothy Corrigan of the U.S. District Court for the Middle District of Florida held that the FTC didn’t have the authority to issue such a broad action. But his decision only applies to the plaintiff, a real estate agency in The Villages, Fla. Nothing has changed for employers across the country that are preparing for the FTC rule to take effect Sept. 4.

We’ve rounded up articles and resources from SHRM Online and other outlets to provide more context on the news.

Waiting for Texas, Again

This is the second federal court to stop the FTC noncompete ban from taking effect, but again only for the parties involved in the suit. A U.S. district court in Texas issued a similar ruling on July 3 in a case brought by the U.S. Chamber of Commerce and other business groups.

All eyes now turn back to Texas, where the judge in that case indicated she would issue a final merits disposition by Aug. 30. The parties have asked for a permanent nationwide injunction in the event the judge sticks to her conclusion that the noncompete ban is unlawful.

(Fisher Phillips)

Lacking Authority

The language in Judge Ada E. Brown’s decision from the U.S. District Court for the Northern District of Texas indicates the rule will be struck down.

Brown held that the FTC violated the Administrative Procedure Act and exceeded its statutory authority by issuing the ban, which she said has a “substantial likelihood” of being found arbitrary and capricious. Brown concluded that the rule, which “imposes a one-size-fits-all approach with no end date” without sufficient consideration of reasonable alternatives, was unreasonably overbroad.

(SHRM Online)

FTC Wins in Pennsylvania

A judge in the U.S. District Court for the Eastern District of Pennsylvania decided in favor of the FTC ban on July 23. In siding with the FTC in the noncompete challenge brought by ATS Tree Services, Judge Kelley B. Hodge created a divide in the federal judiciary on the agency’s powers. The different legal results create more uncertainty for employers as they await the Sept. 4 effective date.

(SHRM Online)

Employers Advised to Wait

U.S. employers should maintain the status quo until the ultimate fate of the rule prohibiting noncompete agreements is decided. That’s what one legal expert communicated to SHRM members in a recent webcast.

(SHRM Online)

Rule to Affect Millions of Workers

The FTC approved its sweeping proposed final rule banning most new noncompete clauses in employment contracts in April. The rule also makes all existing noncompete agreements, except for those covering senior executives, unenforceable, and requires employers to provide notice to current and former workers that their noncompete clauses are no longer in effect. The FTC defines the term “senior executive” to refer to workers earning more than $151,164 annually who are in a “policymaking position.”

(SHRM Online)