Court Blocks FTC Noncompete Ban
August 21, 2024
The pending regulations issued by the Federal Trade Commission (“FTC” or the “Commission”) that largely banned the use of noncompete restrictions have been enjoined on a nationwide basis, and the regulations will not go into effect on September 4th as scheduled.
On August 20, 2024, U.S. District Court Judge Ada Brown of the Northern District of Texas in Ryan, LLC v. Federal Trade Commission blocked the Federal Trade Commission’s near complete ban of noncompete agreements. The FTC issued the final rule banning most noncompetes on April 23, 2024. The FTC is expected to appeal the decision to the Fifth Circuit Court of Appeals.
What’s Next for Employers
With the blocking of the FTC rule, employers can enforce noncompetes in effect and can require employees to enter into noncompete agreements as long as those noncompetes are permissible under relevant state law. Employers who had planned to send notices to current and former employees covered by noncompetes as required by the FTC rule no longer need to do so.
The final disposition of the FTC’s noncompete ban is uncertain, though it is likely never to go into effect. The FTC has indicated willingness to appeal the ruling but any appeal would go to the more conservative U.S. Court of Appeals for the Fifth Circuit and then possibly to the U.S. Supreme Court, which has taken a narrower view of agency rulemaking authority in recent years. At present the noncompete landscape will continue to be governed by the patchwork of state laws.
Additional Information about the FTC Noncompete Ban
Under the final rule most existing noncompete agreements would be invalid as of the September 4th effective date of the regulations and nearly all new noncompete agreements would be prohibited. The Commission cited its authority under Section 5 of the Federal Trade Act to prevent anti-competitive behavior as the legal basis for the regulation. There were some legal carve outs to the ban, for example noncompetes were permissible pursuant to the sale of a business and existing noncompete agreements for narrowly defined “senior executives” remained enforceable. One of the more burdensome aspects of the final rule for employers was the requirement that they provide notices to current and former workers informing them that their noncompetes were no longer legally enforceable after the effective date of the regulations.
Businesses Sue to Block Ban
There was significant opposition from the business community to the noncompete ban and three lawsuits, including this one before Judge Brown, were filed by groups across the country seeking to block the regulations before they went into effect. On August 15th, Judge Timothy Corrigan of the U.S. District Court for the Middle District of Florida entered a preliminary injunction of the regulations in the matter Properties of the Villages, Inc. v. Federal Trade Commission, though the injunction only applied to the plaintiff in the matter. Conversely, U.S. District Court Judge Kelley B. Hodge of the U.S. District Court for the Eastern District of Pennsylvania declined to issue an injunction of the final rule in July, finding that the litigant in ATS Tree Servs. LLC v. FTC “failed to establish a reasonable likelihood that it will succeed on the merits of its claims that the FTC lacks substantive rulemaking authority under its enabling statute, that the FTC exceeded its authority, and that Congress unconstitutionally delegated legislative power to the FTC.”
Judge Brown Blocks FTC Rule
The legal challenge to the noncompete rule before Judge Brown was brought by the U.S. Chamber of Commerce, the tax firm Ryan LLC and others. The complaint alleged that the FTC’s regulation was in excess of the FTC’s statutory authority, an unconstitutional delegation of authority to the FTC, and arbitrary and capricious, among other claims. Judge Brown preliminarily blocked the effective date of her ruling while the parties filed briefs but indicated she would rule prior to the September 4th effective date.
In the opinion issued on August 20th, Judge Brown struck down the noncompete ban on two grounds. First, she found that the FTC lacked the statutory authority under the FTC Act to issue a substantive regulation preventing anti-competitive behavior under the provision cited as the basis for the rule. Second, she found the final rule was arbitrary and capricious under the Administrative Procedures Act (“APA”) because “it is unreasonably overbroad without a reasonable explanation . . . . [and] imposes a one-size-fits-all approach with no end date, which fails to establish a rational connection between the facts found and the choice made.” Judge Brown also determined that the final rule should be set aside as arbitrary and capricious under the APA because the Commission had failed to consider reasonable alternatives to a near complete ban.
FortneyScott will continue to monitor the litigation and provide updates as appropriate. Clients with questions can reach out to their FortneyScott attorney or email info@fortneyscott.com.
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The Equal Employment Opportunity Commission (EEOC) officially opened the 2024 EEO-1 Component 1 data collection portal today, May 20, 2025. All private employers with 100 or more employees and any federal contractors with 50 or more employees are required to file their EEO-1 Reports by June 24, 2025. On the EEOC website employers can find FAQs , instruction booklet , fact sheets , file specifications and more. In her message announcing the opening of the portal, Acting Chair Andrea Lucas reinforced the Trump Administration’s anti-DEI push, stating: I want to take this opportunity to remind you of your obligations under Title VII of the Civil Rights Act of 1964 not to take any employment actions based on, or motivated in whole or in part by, any employee’s race, sex or other protected characteristics. She went on to say that there is no “diversity” exception to Title VII’s requirements and reminded employers that just because employers collect and report race and sex data does not justify using the data to treat employees differently based on protected characteristics. Acting Chair Lucas also noted that President Trump’s Executive Order on disparate impact directed all agencies, including EEOC, to deprioritize “disparate impact” enforcement. If you have any questions, please reach out to your FortneyScott attorney.
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The U.S. Department of Labor (DOL) has launched a new Opinion Letter Program , expanding its compliance assistance for workers, employers, and stakeholders seeking clarity on federal labor laws. This initiative enhances guidance on workplace legal requirements by providing official interpretations from five key enforcement agencies. FortneyScott has extensive experience securing opinion letters, and the Firm has successfully obtained significant DOL opinion letters in the past. What Employers Need to Know Through this program, employers can receive official written interpretations of labor laws as they apply to specific workplace situations. The following agencies will issue tailored guidance: Wage and Hour Division (WHD): Provides opinion letters on wage, hour, and employment law matters. Occupational Safety and Health Administration (OSHA): Issues letters of interpretation on workplace safety regulations. Employee Benefits Security Administration (EBSA): Publishes advisory opinions and information letters on employee benefits compliance. Veterans’ Employment and Training Service (VETS): Releases opinion letters related to veteran employment laws. Mine Safety and Health Administration (MSHA): Offers compliance assistance through the new MSHA Information Hub, featuring regulatory updates and training resources. Why It Matters Opinion letters provide clarity, consistency, and transparency in federal labor law enforcement. Employers can use them as reliable legal guidance to ensure adherence to wage, benefits, and safety requirements, reducing the risk of noncompliance and potential litigation. Deputy Secretary of Labor Keith Sonderling emphasized that “opinion letters are an important tool in ensuring workers and businesses alike have access to clear, practical guidance.” Next Steps for Employers To leverage this resource, employers can: Explore previously issued guidance . Contact your FortneyScott attorney should you need any assistance in submitting a request for an opinion letter or compliance guidance. This program presents a valuable opportunity for businesses to navigate complex employment laws with authoritative insights from federal agencies. Employers should consider requesting opinion letters when facing regulatory uncertainties to strengthen compliance efforts
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On May 19, 2025, the Department of Justice (DOJ) announced a new Civil Rights Fraud Initiative, which will utilize the False Claims Act (FCA) to investigate and, as appropriate, pursue claims against any recipient of federal funds that knowingly violates federal civil rights laws. Violations of the FCA can result in treble damages and significant penalties. Deputy US Attorney General Todd Blanche issued a memorandum instructing DOJ attorneys to file FCA claims against recipients of federal money if a recipient knowingly violates civil right laws and falsely certifies compliance with Title IV, Title VI, and Title IX of the Civil Rights Acts of 1964. The memorandum states that the FCA is also implicated whenever federal funding recipients and contractors certify compliance with civil rights laws while knowingly engaging in racist preferences, mandates, policies, programs and activities, including through diversity, equity, and inclusion (DEI) programs that assign benefits or burdens on race, ethnicity, or national origin. The memorandum provided the following example as violating the FCA: Accordingly, a university that accepts federal funds could violate the False Claims Act when it encourages antisemitism, refuses to protect Jewish students, allows men to intrude into women’s bathrooms, or requires women to compete against men in athletic competitions. The Initiative will utilize the FCA to investigate and pursue claims, and will be co-led by the DOJ’s Civil Division’s Fraud Section and the Civil Rights Division. Finally, the DOJ strongly encourages private parties “to protect the public interest by filing lawsuits and litigating claims” under the FCA—reminding the public that successful FCA claims will result in the reporting party receiving a share of the financial damages that are imposed again FCA violators. FortneyScott will continue to monitor these developments. If you have any questions, please reach out to your FortneyScott attorney.
The Equal Employment Opportunity Commission (EEOC) officially opened the 2024 EEO-1 Component 1 data collection portal today, May 20, 2025. All private employers with 100 or more employees and any federal contractors with 50 or more employees are required to file their EEO-1 Reports by June 24, 2025. On the EEOC website employers can find FAQs , instruction booklet , fact sheets , file specifications and more. In her message announcing the opening of the portal, Acting Chair Andrea Lucas reinforced the Trump Administration’s anti-DEI push, stating: I want to take this opportunity to remind you of your obligations under Title VII of the Civil Rights Act of 1964 not to take any employment actions based on, or motivated in whole or in part by, any employee’s race, sex or other protected characteristics. She went on to say that there is no “diversity” exception to Title VII’s requirements and reminded employers that just because employers collect and report race and sex data does not justify using the data to treat employees differently based on protected characteristics. Acting Chair Lucas also noted that President Trump’s Executive Order on disparate impact directed all agencies, including EEOC, to deprioritize “disparate impact” enforcement. If you have any questions, please reach out to your FortneyScott attorney.
EEOC is expected to open the portal for submission of 2024 EEO-1 Component 1 Report on May 20, 2025. On May 12, 2025, the Office of Information and Regulatory Affairs (OIRA) of the Office of Management and Budget (OMB) approved the proposed changes to the 2024 EEO-1 Component 1 Report. The EEOC had submitted the revised 2024 EEO-1 Component 1 Data Collection Instruction Booklet and justifications for the changes to OMB on April 15. The primary change for employers is the elimination of the report’s non-binary reporting option in response to President Trump’s Executive Order 14168, Defending Women From Gender Ideology Extremism and Restoring Biological Truth to the Federal Government . In addition, EEOC will no longer provide the “Notice of Failure to File” letter to employers with incomplete or unfiled EEO-1 Reports and updated the procedures for requesting an undue hardship. According to the EEOC’s 2024 EEO-1 Component 1 Data Collection Instruction Booklet, employers will have a much shorter filing period to file their reports than in previous years as the portal will close on June 24, 2025 . With this significantly shorter filing period (which is nearly a month shorter than last year), employers should begin collecting their data as soon as possible. One additional note, although Executive Order 11246 was rescinded by President Trump on January 21, 2025, the Booklet notes that federal contractors with 50 or more employees will still be required to file EEO-1 Reports on their 2024 data. FortneyScott will provide an update as soon as EEOC officially announces the opening of the portal for submission of 2024 EEO-1 Component 1 Reports. If you have any questions, please reach out to your FortneyScott attorney.
Most of the remaining employees of the Department of Labor’s Office of Federal Contract Compliance Programs received layoff notices this week as the plan to drastically downsize the Office in the wake of Executive Order 14173 proceeds. Affected workers at the OFCCP got a 30-day warning in advance of their June 6th terminations. The agency plans to maintain a presence only in the Southwest region, with a headquarters in Dallas.
President Donald Trump has nominated Brittany Bull Panuccio, an assistant U.S. attorney in Florida, to the U.S. Equal Employment Opportunity Commission. If confirmed, her term would run to July 2029. Panuccio's confirmation would restore the Commission's quorum and create a Republican majority. The reconstituted Commission would be able to issue or withdraw regulations and institute policies in the line with the Trump administrations’ positions. She will join EEOC's Acting Chair, Andrea Lucas, a Trump appointee (renominated), and Commissioner Kalpana Kotagal, who was appointed by President Joe Biden.
Today, the DOL published a Field Assistance Bulletin (FAB) to provide enforcement guidance to the DOL’s Wage and Hour Division (WHD) field staff when determining whether an independent contractor has been misclassified under FLSA. Specifically, the DOL’s Press Release states that the agency is still reviewing the 2024 final rule, Employee or Independent Contractor Classification Under the Fair Labor Standards Act (2024 Rules) and, therefore, WHD investigators are directed not to apply the 2024 Rule when determining employee versus independent contractor status in FLSA investigation. Instead, investigators are told to rely on the prior version of Fact Sheet 13 that was issued in July 2008 which is included in the FAB, and reinstated Opinion Letter FLSA 2019-6 with respect to any matter for which no payment has been made for back wages and/or civil money penalties as of May 1, 2025. It's important to note that the 2024 Rule remains in effect for purposes of private litigation and nothing in this FAB changes the rights of employees or responsibilities of employers under the FLSA. Employers should review the FAB and the additional documentation to understand how the current Administration will enforce independent contractor misclassification. Should you have any questions, please reach out to your FortneyScott attorney.
As employers navigate evolving legal, political, and cultural dynamics in the workplace, certain core obligations remain as critical as ever. This webinar will focus on three areas of the law that deserve renewed attention in 2025 and beyond: Barrier Analysis: With many employers scaling back or eliminating formal DEI initiatives, barrier analysis has become an essential—and legally sound—tool to identify and prevent workplace discrimination. We’ll explore how employers can use barrier analyses to effectively meet compliance goals and mitigate legal risk. Pay Practices: As state-level requirements continue to expand, pay practices remain central to legal compliance. We’ll break down what employers need to do now to stay ahead of audits, meet transparency mandates, and proactively address pay disparities. Accommodations: Religious and disability-related accommodation requests are on the rise. We’ll discuss recent legal developments and best practices for managing accommodation requests consistently and lawfully.
