Yesterday, a federal judge in Texas struck down the Federal Trade Commission‘s (FTC) rule that banned non-compete agreements across the nation. You can read the judge’s full order here. The rule was set to go into effect on September 4, 2024, but as of yesterday, the FTC’s ban on non-competes is dead.
The Court Found that the FTC’s Ban on Non-Competes was Unenforceable
The judge granted summary judgment to the parties who were opposing the FTC’s rule, which means the judge determined that the rule was not lawful and must be struck down in its entirety. The judge further ruled her order applies to the whole country, not just the specific plaintiffs in this federal case in Texas.
The court found that the FTC lacked the authority to issue the rule to begin with, as the FTC’s actions exceeded the power delegated to the FTC by Congress. The court also held that the FTC’s rule–which applied to most employers across the country–was overly broad and was thus arbitrary and capricious. Therefore, the court held the rule was unenforceable and must be struck down.
I would expect that the FTC appeals the trial court’s ruling up to the Fifth Circuit Court of Appeals, although I don’t anticipate that the appellate court will revive the rule.
What Does the Judge’s Ruling Mean for South Carolina Employees?
In terms of a remedy, keep in mind that the judge had issued an injunction back in July 2024, but that injunction–preventing the enforcement of the rule–only applied to the plaintiffs who had brought the case. Now, though, the judge held that the rule was to be set aside (i.e., no longer in effect) and not enforceable against any companies anywhere in the nation.
For South Carolina employees, that means that any existing non-competes can still be enforced by a South Carolina court against an employee. However, those non-competes are still subject to the same scrutiny by the court as to enforceability. South Carolina disfavors non-compete agreements, but courts will enforce them IF the non-competes are narrowly tailored in terms of time (length of the non-compete) and geographic scope (where the non-compete applies, i.e., which county, state, or radius), supported by valuable consideration (new employment or a new employee benefit/money), not unduly burdensome in preventing an employee from working, and reasonable in terms of South Carolina public policy.
Moving forward, employees should still have a South Carolina employment lawyer review the non-compete agreements before you sign one, or if you’ve already signed, then before you take any actions that might violate that agreement. Give our office a call at 864-233-4351 if you have any questions about non-compete or non-solicit agreements.
