Federal Court Rules FTC Noncompete Ban Unconstitutional

A federal court in Texas has struck down the FTC's rule banning noncompete clauses in employment contracts, ruling that the agency acted outside its legal authority. This decision, which Judge Ada Brown described as having nationwide implications, follows a series of conflicting rulings in Florida and Pennsylvania regarding the FTC's ability to enforce such a ban. The ruling is likely to influence state-level legislation, particularly aimed at limiting noncompetes in the healthcare sector, though the FTC is considering an appeal. Employment attorneys note that noncompete agreements have been historically used but are increasingly scrutinized for their impact on workers. With the litigation ongoing, employers are advised to prepare for potential changes in legal requirements concerning noncompete agreements. The situation remains fluid, as further appeals may shape the future of these employment contracts.