A Texas federal district court recently concluded that the Federal Trade Commission (FTC) lacks the requisite statutory authority from Congress to enact a controversial rule that would prevent employers from entering into noncompete clauses and, beyond that, bar them from enforcing most existing noncompete clauses.

The FTC's Noncompete Clause Rule is scheduled to take effect on September 4. However, U.S. District Judge Ada Brown from the Northern District of Texas granted certain challengers' motion to stay the effective date of the rule and entered a preliminary injunction that prohibits the FTC from implementing and enforcing the rule until the court can resolve the ultimate merits of the challengers' claims, which the Texas judge intends to do by August 30, 2024.

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