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.
Federal contractors are facing immediate changes to implement stepped-up efforts to restrict DEI discrimination, including new mandatory contract clauses, expanded audits, and significant potential legal exposure. These far-reaching changes will impact prime contractors and all tiers of subcontractors. Any employer that is a federal contractor should immediately prepare for these new compliance obligations.
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Employers need to continue to be vigilant in their compliance efforts for DEI and related programs. Here are two quick updates: To assist employers, our most recent DC Insider-Employer Update podcast – EO 14398 and the Procurement Power Play: Compliance, Contracts, and Consequences – provides a great overview of the newest Executive Order and federal contractor compliance. Additionally, late Friday, April 10 th , DOJ announced the first False Claims Act settlement based on DEI claims against IBM for $17 million. Please contact your FortneyScott attorney for more information, and visit our website ( www.fortneyscott.com ) for our recent special webinar .
The Trump Administration continues to push for the elimination of “illegal DEI.” Join FortneyScott attorneys on Thursday, April 9, 2026 at noon EDT to learn the latest developments by multiple federal agencies targeting DEI programs and policies. The webinar will address the key federal agencies’ expansive efforts, including: EEOC , focusing on the agency’s latest challenges to DEI, including expansive investigations of corporate DEI programs, subpoena enforcement litigation and limiting the rights of trans workers; DOJ , including the False Claims Act investigations, and challenges to the constitutionality of EO 14173 in 4th and 7th Circuits; FTC & FCC , highlighting the Mansfield Program, and warning law firms about antitrust compliance, and how DEI can impact regulatory approvals; and, Certification of Compliance , including GSA’s proposed Certification for grantees, and the implications for federal contractors. We also will provide key takeaways for DEI compliance, and steps to mitigate the risks of federal government enforcement actions based on illegal DEI matters. This webinar is the final in a three-part series designed for compliance professions, in-house counsel, HR and inclusion leaders, and other business leaders responsible for labor and employment law compliance.
In this special webinar we will address: Details of the new EO; The specific prohibition on “racially discriminatory DEI activities” in five key areas; The new requirements that add materiality to the contract payments and the expansion of the basis for False Claims Act exposure; New subcontractor management and reporting duties; Penalties and enforcement, including contract cancellation, debarment from future contracts and FCA actions by DOJ; and, The detailed implementation deadline for actions, including the new contract clauses, FAR Council guidance and agencies compliance report to the White House.
Federal contractors are facing immediate changes to implement stepped-up efforts to restrict DEI discrimination, including new mandatory contract clauses, expanded audits, and significant potential legal exposure. These far-reaching changes will impact prime contractors and all tiers of subcontractors. Any employer that is a federal contractor should immediately prepare for these new compliance obligations.
DOL Proposes New Joint Employer Standard In an effort to create a uniform, nationwide standard for determining joint employer status, the U.S. Department of Labor’s Wage and Hour Division will publish a Notice of Proposed Rulemaking (NPRM) in the Federal Register on April 23, 2026. The proposed Joint Employer Rule aims to restore a standard similar to the more business-friendly Trump 1.0 rule. Specifically, the proposed rule clarifies when multiple organizations would be considered joint employers under the Fair Labor Standards Act, the Family and Medical Leave Act, and the Migrant and Seasonal Agricultural Worker Protection Act. Comments are due within 60 days of the published date, or June 22, 2026. The proposed rule seeks to end nearly a decade of vacillating rules, as both the Trump and Biden administrations had tried promulgating a final rule previously. Those prior attempts created a series of conflicting executive and judicial rulings. As stated by acting Labor Secretary Keith Sonderling, this NPRM is intended to establish a “clear standard on joint employment.” Four-Factor Test The proposed rule modifies the Trump 1.0 standard, which focused heavily on requiring actual control by one company over another to establish joint employment. A prior judicial challenge to that approach was successful, requiring some modification to any new standard introduced thereafter. The proposed rule, therefore, responds by offering a four-factor test that is still heavily weighed on aspects of control. The four factors are whether a company: has the power to hire or fire a worker; supervises or controls a worker’s schedule or conditions of employment to a substantial degree; determines the rate and method of payment; and maintains a worker’s employment records. No single factor is dispositive, and the analysis will focus on the totality of the circumstances. Single National Standard Still a Goal The DOL acknowledged that some circuit courts continue to consider more factors and said the four listed factors were “not exhaustive.” Additionally, other federal agencies and several states have their own joint employer standards, some of which are directed at specific industries. For instance, the NLRB finalized its joint employer rule in late February 2026, with a similarly aligned standard that has some variances from DOL’s proposed standard. A final rule is anticipated soon after the comment period closes. Once issued, the rule may be subject to judicial challenges from interested parties that previously opposed similar regulatory approaches. Contact your FortneyScott attorney for additional information on how to submit comments and/or prepare for its impact on your workforce.
Federal contractors are facing immediate changes to implement stepped-up efforts to restrict DEI discrimination, including new mandatory contract clauses, expanded audits, and significant potential legal exposure. These far-reaching changes will impact prime contractors and all tiers of subcontractors. Any employer that is a federal contractor should immediately prepare for these new compliance obligations. The Federal Acquisition Regulatory Council (FAR Council), which sets government-wide procurement policy and regulation for all federal agencies, has moved quickly to implement Executive Order (EO) 14398 , Addressing DEI Discrimination by Federal Contractors. Specifically, the FAR Council: Issued government-wide implementation guidance and class deviation language for all federal agencies to incorporate a mandatory contract clause, as prescribed in EO 14398, as soon as April 24, 2026, in new solicitations, and by July 24, 2026, for bilateral modifications of existing contracts. The class deviation authorizes agency-wide implementation of new requirements in federal contracts before the Federal Acquisition Regulations (FAR) are amended formally. Requested emergency approval, under the Paperwork Reduction Act (PRA), to allow immediate enforcement of EO 14398’s information collection and reporting requirements. Join FortneyScott for a complimentary briefing on Monday, April 27, at noon ET . Please register here . Contact your FortneyScott attorney for additional information on how to prepare for this new contract clause.
Employers need to continue to be vigilant in their compliance efforts for DEI and related programs. Here are two quick updates: To assist employers, our most recent DC Insider-Employer Update podcast – EO 14398 and the Procurement Power Play: Compliance, Contracts, and Consequences – provides a great overview of the newest Executive Order and federal contractor compliance. Additionally, late Friday, April 10 th , DOJ announced the first False Claims Act settlement based on DEI claims against IBM for $17 million. Please contact your FortneyScott attorney for more information, and visit our website ( www.fortneyscott.com ) for our recent special webinar .
The Trump Administration continues to push for the elimination of “illegal DEI.” Join FortneyScott attorneys on Thursday, April 9, 2026 at noon EDT to learn the latest developments by multiple federal agencies targeting DEI programs and policies. The webinar will address the key federal agencies’ expansive efforts, including: EEOC , focusing on the agency’s latest challenges to DEI, including expansive investigations of corporate DEI programs, subpoena enforcement litigation and limiting the rights of trans workers; DOJ , including the False Claims Act investigations, and challenges to the constitutionality of EO 14173 in 4th and 7th Circuits; FTC & FCC , highlighting the Mansfield Program, and warning law firms about antitrust compliance, and how DEI can impact regulatory approvals; and, Certification of Compliance , including GSA’s proposed Certification for grantees, and the implications for federal contractors. We also will provide key takeaways for DEI compliance, and steps to mitigate the risks of federal government enforcement actions based on illegal DEI matters. This webinar is the final in a three-part series designed for compliance professions, in-house counsel, HR and inclusion leaders, and other business leaders responsible for labor and employment law compliance.
In this special webinar we will address: Details of the new EO; The specific prohibition on “racially discriminatory DEI activities” in five key areas; The new requirements that add materiality to the contract payments and the expansion of the basis for False Claims Act exposure; New subcontractor management and reporting duties; Penalties and enforcement, including contract cancellation, debarment from future contracts and FCA actions by DOJ; and, The detailed implementation deadline for actions, including the new contract clauses, FAR Council guidance and agencies compliance report to the White House.
In collaboration with FortneyScott and Fragomen law firms, LRQA officially launched TriAge: Age & Eligibility Verification Framework , designed to help employers strengthen hiring and workforce monitoring amid rising age and eligibility verification risks. TriAge goes beyond basic I‑9 compliance by providing a structured set of best practices to verify identity, age, and eligibility across operations. The framework also supports enhanced oversight and allows for independent validation through audits and assessments. We are proud to have contributed to the development of LRQA’s TriAge, a practical tool that helps employers build stronger, more defensible hiring practices.
President Trump issued a new Executive order ( EO 14398 ) on March 26, 2026, entitled “Addressing DEI Discrimination by Federal Contractors,” and accompanying Fact Sheet . The new EO fundamentally alters the compliance landscape for government contractors. While prior executive orders addressed DEI programs through policy directives, this new EO creates a mandatory, enforceable contract clause that exposes contractors to contract termination, debarment, and False Claims Act (FCA) liability. The Core Requirement: A New Mandatory Contract Clause Within 30 days (by April 25, 2026), agencies must insert a specific clause into all covered contracts, subcontracts, and lower-tier subcontracts. By accepting a contract containing this clause, contractors agree to six binding obligations: 1. The contractor will not engage in any “racially discriminatory DEI activities,” as defined in Section 2 of the Executive Order of March 26, 2026 (Addressing DEI Discrimination by Federal Contractors): 2. The contractor will furnish to contracting agencies all information and reports, including providing access to books, records, and accounts, for purposes of ascertaining compliance; 3. In the event of the contractor’s or a subcontractor’s noncompliance with this clause, the government contract may be canceled, terminated, or suspended in whole or in part, and the contractor or subcontractor may be declared ineligible for further Government contracts; 4. The contractor will report any subcontractor’s known or reasonably knowable conduct that may violate this clause to the contracting department or agency and take any appropriate remedial actions directed by the contracting department or agency; 5. The contractor will inform the contracting department or agency if a subcontractor sues the contractor and the suit puts at issue, in any way, the validity of this clause; and, 6. The contractor recognizes that compliance with the requirements of this clause are material to the Government’s payment decisions for purposes of section 3729(b)(4) of title 31, United States Code (False Claims Act). Immediate Action to Meet Deadlines Federal contractors face very short deadlines for the implementation of these new obligations, including the inclusion of the new contracting clauses within 30 days, by April 25, 2026. Federal contractors should initiate steps immediately to ensure compliance, including: 1. Audit Internal Programs: Review mentorship programs, ERGs, leadership development tracks, and supplier diversity initiatives for eligibility criteria based on race or ethnicity. 2. Update Subcontractor Agreements: Immediately begin flowing the mandatory clause down to all subcontractors and establish a monitoring system to satisfy the “known or reasonably knowable” reporting standard. 3. Review Invoicing and Certifications: Ensure that no compliance certifications or payment requests are submitted if prohibited activities exist. For More Information and Assistance Register now for FortneyScott’s special webinar, Federal Contractors’ New DEI Obligations that will be held on Tuesday, March 31, 2026 from 12:00 noon to 1:00 ET. This special webinar we will address: - Details of the new EO - The specific prohibition on “racially discriminatory DEI activities” in five key areas - The new requirements that add materiality to the contract payments and the expansion of the basis for False Claims Act exposure - New subcontractor management and reporting duties - Penalties and enforcement, including contract cancellation, debarment from future contracts and FCA actions by DOJ - The detailed implementation deadline for actions, including the new contract clauses, FAR Council guidance and agencies compliance report to the White House For more information on how federal contractors can comply with this new EO, contact your FortneyScott’s attorney or email us at info@fortneyscott.com .
The Trump Administration continues to push for the elimination of “illegal DEI.” Join FortneyScott attorneys on Thursday, April 9, 2026 at noon EDT to learn the latest developments by multiple federal agencies targeting DEI programs and policies. The webinar will address the key federal agencies’ expansive efforts, including: EEOC , focusing on the agency’s latest challenges to DEI, including expansive investigations of corporate DEI programs, subpoena enforcement litigation and limiting the rights of trans workers; DOJ , including the False Claims Act investigations, and challenges to the constitutionality of EO 14173 in 4th and 7th Circuits; FTC & FCC , highlighting the Mansfield Program, and warning law firms about antitrust compliance, and how DEI can impact regulatory approvals; and, Certification of Compliance , including GSA’s proposed Certification for grantees, and the implications for federal contractors. We also will provide key takeaways for DEI compliance, and steps to mitigate the risks of federal government enforcement actions based on illegal DEI matters. This webinar is the final in a three-part series designed for compliance professions, in-house counsel, HR and inclusion leaders, and other business leaders responsible for labor and employment law compliance. To register for FortneyScott’s Workplace Legal Compliance training series, please click here .
Having been fully funded for FY2026 and with new leadership in place, employers can expect much more from the Department of Labor in the second year of Trump 2.0. Join FortneyScott attorneys on Tuesday, March 3, 2026 at noon EDT to learn DOL’s priorities for 2026 and how to ensure compliance. Key Topics to be Covered Include: Overview of DOL Trump 2.0 officials Budget for FY2026 Next Steps from Wage & Hour Status of regulations PAID Program Return of Opinion Letters Child Labor enforcement FY2025 recovery Project Firewall Joint project with DOJ, EEOC and USCIS over H-1Bs Future of OFCCP – What to expect from the agency now that it has been funded Key Takeaways to ensure compliance This webinar is the second in a three-part series designed for compliance professions, in-house counsel, HR and inclusion leaders, and other business leaders responsible for labor and employment law compliance.
