On Tuesday, August 20, 2024, a federal court in the Northern District of Texas struck down the Federal Trade Commission’s (“FTC”) rule banning the use and enforcement of most non-compete clauses. The rule, that was scheduled to go into effect on September 4, 2024, has been set aside in its entirety. Employers are no longer required to provide notice to current and former employees that their non-compete clauses cannot be enforced.
The court struck down the rule on two different bases. First, it found that Congress had not given the FTC the authority to make substantive rules regarding unfair competition. Second, the court determined that the FTC had failed to consider alternatives that were less disruptive to the status quo and did not properly balance the interests of those businesses that rely on these agreements with its policy concerns.
The result of this ruling is that, at least for now, employers may continue to enforce and enter into non-compete agreements. In Idaho, the legal landscape is unchanged and those agreements that are reasonable in scope, duration, and geographic area, and that are crafted to protect an employer’s legitimate business interests, are still valid.
It is expected that the FTC will appeal this ruling and that it may eventually make its way to the United States Supreme Court. However, it appears unlikely that there will be a revival of this rule in the short-term.
Employers may still want to take this opportunity to review policies and existing agreements to make sure that they comply with the law and promote their business goals.