The Federal Trade Commission (FTC) dismissed its appeals in two legal challenges to its 2024 rule banning noncompete agreements in employment contracts.
The noncompete rule never took effect. It was issued in April 2024 and would have banned most noncompete agreements nationwide, but it was struck down by judges who said it exceeded the agency's authority.
A 3-1 majority of the agency's commissioners voted Sept. 5 to dismiss the appeals and accede to the vacatur. In a statement, FTC Chairman Andrew Ferguson said the ban's "illegality was patently obvious" and "would never survive judicial review." He added, "We can continue tilting at windmills by defending the Biden administration's indefensible rule, or we can get down to the hard business of promoting labor competition and protecting American workers."
The lone dissent came from Commissioner Rebecca Slaughter, who said that "the record in the FTC's own rulemaking made clear that noncompetes not only present barriers to worker mobility but also suppress wages, prevent new business formation, and slow innovation."
Rachel Satinsky, an employment attorney based in Littler's Philadelphia office, said that the FTC decision is good news for employers and not unexpected given the change in administration.
"At the same time, the FTC has made clear that it intends to play a role in ensuring that overbroad noncompete agreements are not used," Satinsky said. "This is not a free pass to start signing one-size-fits-all noncompete...
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