In a clear rebuke, a Federal District Court struck down a controversial Federal Trade Commission (FTC) rule that sought to ban employers from using noncompete agreements.  Such a widespread prohibition would have affected the use such contracts by millions of Americans – including those used by CIRT members.  The court found fault with the FTC banning the entire category of non-compete agreements, rather than targeting “specific harmful” sub-categories of such contracts.  However, more importantly, the decision found that the FTC’s attempted prohibition went beyond the commission’s mandate to police unfair methods of competition. The ban on the non-compete contracts was supposed to go into effect on September 4, 2024, affecting roughly 30 million American workers according to the FTC.

In a stinging  finding the District Judge concluded: “The Commission’s lack of evidence as to why they chose to impose such a sweeping prohibition — that prohibits entering or enforcing virtually all non-competes — instead of targeting specific, harmful non-competes, renders the Rule arbitrary and capricious” (emphasis added).  The District Court ruling seems to be an early example of the new landscape for federal government agencies and quasi-independent commissions in the wake of the Supreme Court ruling discarding the “Chevron Deference Doctrine” that had been cited to favor the federal government’s regulatory authority and actions.

The FTC has yet to announce whether or not it intends to appeal the District Court opinion overturning its attempted prohibition.