On July 23, we reported that the United States District Court for the Northern District of Texas issued a preliminary injunction blocking the Federal Trade Commission’s Final Non-Compete Clause Rule (“Final Rule”) from taking effect on September 4, 2024. On August 20, the Court converted the preliminary injunction into a permanent injunction, ruling that the FTC “exceeded its statutory authority” in enacting the Final Rule and that the rule was “arbitrary and capricious.” The permanent injunction had broad implications. The Final Rule would have prohibited the use of most existing non-compete agreements and prevented the enforceability of new non-compete agreements. Unlike the preliminary injunction, which applied only to the parties in the action, the permanent injunction applies to non-parties. As a result of the ruling, employers are not required to comply with the proposed ban, including the requirement to notify current and former employees that their noncompete agreements are unenforceable. However, it is important to note that state law will continue to govern the enforceability of noncompete agreements.
The attorneys in Kane Kessler’s Labor & Employment Group are available to assist companies with a full range of labor and employment issues. Please contact Dana Susman, dsusman@kanekessler.com at 212 519-5136, Naomi Lantsberg, nlantsberg@kanekessler.com at 212 519-5117, or Jonathan Sabin, jsabin@kanekessler.com at 212 519-5113 for additional information.