WASHINGTON—American Hotel & Lodging Association (AHLA) Interim President and CEO Kevin Carey released the following statement after a federal judge in Texas blocked the Federal Trade Commission (FTC) from enforcing a rule that bans noncompete agreements:
“The FTC overstepped its authority by approving a rule that allows federal interference in multitudes of business agreements across the country. In doing so, the FTC set a dangerous precedent for intruding into an area that has been regulated by the states throughout our nation’s history,” said Carey. “We applaud the judge’s decision and will continue to support efforts to overturn the FTC’s unjustified and overly broad rule.”
On April 23, 2024, the FTC released a final rule banning noncompete agreements, which was scheduled to take effect on September 4, 2024.
On April 24, 2024, a coalition of industry groups challenged that rule in the U.S. District Court for the Eastern District of Texas. The lawsuit argued that the rule exceeded the FTC’s authority and sought to ban a practice that has historically been governed by state law.
AHLA and other business groups filed an amicus brief in May in support of the lawsuit. That brief said the FTC’s rule ignores the more than 200 years of state jurisdiction over noncompete agreements, upends companies’ contractual relations with their employees, and makes it more difficult for companies to protect their legitimate business interests.
On August 20, 2024, Judge Ada Brown blocked the FTC rule, a decision that will prevent the FTC from implementing it, absent any potential FTC appeal.
