What blocking of FTC rule banning noncompetes means for Nebraska employers

In April of this year, the Federal Trade Commission (FTC) proposed a rule that would ban noncompete clauses in employment agreements, which was set to take effect on September 4, 2024. On Tuesday, August 19, 2024, a federal judge in Dallas, Texas, set aside the rule, blocking it from taking effect on grounds that the FTC exceeded its statutory authority to ban such agreements. The FTC will likely appeal this ruling. In the interim, let’s examine what this means for employers in Nebraska and elsewhere.

Background

For the past several years, the FTC has been planning to move forward with action to ban noncompete agreements. In April of this year, in a split 3-2 decision of the commissioners, the FTC approved the new proposed rule, which was set to go into effect on September 4, 2024. 

This development was immediately met with much controversy and opposition from a variety of business groups and organizations, resulting in three primary legal decisions to block or enjoin the FTC from moving forward with implementation of the rule. Prior to the decision of the U.S. District Court for the Northern District of Texas this week, a court in Florida had granted a preliminary injunction prohibiting enforcement of the rule only as to the plaintiff, a retirement community in Florida, but no other companies. Additionally, in a lawsuit brought in Pennsylvania, the court concluded that the plaintiff failed to show it would be irreparably harmed and refused to block the rule from moving forward.