The Federal Trade Commission’s rule was temporarily blocked in Texas. However, this ruling only applies to five entities in the suit. For the rest of the country, nothing has changed quite yet, and the non-compete ban is still expected to take effect on September 4.
What Happened in Texas?
The U.S. Chamber of Commerce and a handful of other business organizations in Texas sued the FTC and sought an order blocking the non-compete rule from taking effect. The Texas court agreed that the FTC lacked the authority to issue the final rule; however, it didn’t issue a nationwide injunction.
What Is Coming Next?
Similar to the lawsuit in Texas, there’s another case currently pending in Pennsylvania. The lawyers in this case are expected to be well-prepared to address the issues of a nationwide injunction.
What Needs to be Done Now?
Because the Texas decision doesn’t affect the rest of the country, it’s important that employers across the U.S. still prepare for the upcoming changes that will take effect in September.
Employers will need to develop a personalized strategy, taking stock of existing restrictive covenant agreements to understand how many non-compete provisions may be impacted if the non-compete ban takes effect. They should also revisit restrictive covenants and consider whether non-competes are necessary for their business.