On Aug. 20, 2024, a federal judge upheld a challenge to the Federal Trade Commission’s (FTC) Non-Complete Clause Rule (Rule), blocking it nationwide. It was originally scheduled to go into effect on Sept. 4. The Rule, which faced numerous court challenges, aimed to invalidate most non-compete clauses in the United States, subjecting violators to fines, penalties and injunctive relief. The court’s decision blocks the Rule nationwide, and businesses do not need to take steps to comply with the rule.
More About This Matter
On April 23, the U.S. Chamber of Commerce (Chamber) sued the FTC over its Rule. On Aug. 20, 2024, the court granted the Chamber’s motion for summary judgment holding that the FTC’s Rule “shall not be enforced or otherwise take effect” because “the FTC lacks substantive rulemaking authority with respect to unfair methods of competition.”
The Rule was scheduled to be effective Sept. 4. The Rule banned new non-compete agreements with all workers. Additionally, it required employers to tell workers (current and former) that existing non-compete agreements were no longer enforceable, although the ban included an exemption for current non-competes covering “senior executives.”
What’s Next (As of This Writing)
Dealerships do not have to comply with the Rule and should set aside previous guidance issued by NADA in preparation for the effective date. The FTC has indicated that they may appeal the case, and NADA will keep members updated as necessary. NADA, as part of a broad coalition led by the Chamber, drafted and submitted comments in response to the original proposed rule. These comments challenged, among other issues, the FTC’s authority to issue this rule.
