Update on FTC Non-Compete Rule

By Mark Fischer and Ron Lefebvre

July 10, 2024

As we previously wrote (https://www.ymfzlaw.com/ftc-ban-on-non-competes/), the Federal Trade Commission (“FTC”) adopted a final rule on April 23, 2024 (the “Rule”), providing that “it is an unfair method of competition” for employers to enter into non-compete clauses with their workers and effectively banning such clauses as illegal under the Federal Trade Commission Act. The Rule would go into effect 120 days after its initial publication.

Shortly after the Rule was issued, several plaintiffs (including the Chamber of Commerce) challenged the Rule in litigation before the United States District Court for the Northern District of Texas, arguing that the FTC exceeded its authority. Plaintiffs requested a stay of the Rule while their challenge was being heard.

On July 3, 2024, the District Court entered an order granting the requested stay. In its July 3 Order, the Court concluded that “the [FTC] has exceeded its statutory authority in promulgating the Non-Compete Rule, and thus Plaintiffs are likely to succeed on the merits.”  This is the first major ruling from any court regarding the FTC’s authority to enact the Rule and is consistent with significant legal commentary which strongly questioned such authority.

However, the District Court limited the stay to the participants in this litigation and declined to apply it nationwide. Accordingly, absent further order from this or other courts, businesses should be prepared to comply with the Rule, which goes into effect on September 4, 2024. We will continue to monitor litigation regarding the Rule. Please contact our firm if you have questions regarding compliance.


YMFZ is an efficient, skilled, closely-held Pittsburgh law firm which for more than 30 years has been offering good counsel, personal attention, and cost-effective representation to its clients for all manner of business legal needs, including commercial litigation, business set-up and finance, commercial and technology contracting (including bank representation), employment law, real estate (including oil and gas), and intellectual property. YMFZ clients include both large national and multi-national corporations and regional and local businesses. For more information on our firm, please visit www.ymfzlaw.com.

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Notice: This article is for informational purposes only. None of the information contained in the article constitutes legal advice. No reader should act on such information without first seeking legal advice from an attorney.