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With just over two weeks until the Federal Trade Commission’s (FTC) Non-Compete Clause Rule (the Rule) was set to take effect, Judge Ada Brown of the U.S. District Court for the Northern District of Texas has struck down the Rule. Specifically, this means the Rule will not be enforced or take effect nationwide on September 4 as originally scheduled. See Ryan LLC v. Federal trade Commission, Case No. 3:24-cv-00968-E (N.D. Tex. Aug. 20, 2024), ECF Doc. 211.
This presents a huge hurdle to the FTC’s fight to ban non-compete agreements. Shortly after the FTC published the Rule earlier this year, Ryan LLC and a number of plaintiff-intervenors filed suit challenging the FTC’s constitutional and statutory authority to issue the Rule. Judge Brown initially enjoined the implementation and enforcement of the Rule as to only the named plaintiffs. On August 20, Judge Brown made her final ruling that the FTC exceeded its statutory authority and that the Rule was arbitrary and capricious. In doing so, she set aside the Rule nationwide.
Consequently, as of now, employers will be able to continue to enter into and seek enforcement of non-compete agreements with their current and former employees. They will also no longer be required to circulate the required notice educating employees on the impact of the Rule by the intended September 4 effective date. And, while the FTC is considering a potential appeal, it now has a tough hill to climb in having this ruling reversed. We will keep you updated as things develop.