Federal Judge Sets Aside FTC Non-Compete Ban on a Nationwide Basis

As we’ve previously reported, earlier this year, the FTC proposed a near-total ban on non-competes that was promptly challenged by business groups and employers. These challenges resulted in a split of decisions in the lower federal courts, with two—in Texas and Florida—striking down the ban while a Pennsylvania court upheld it. Neither the Texas nor Florida decisions were complete victories for employers, however. Because the injunctions in those cases were plaintiff-specific, everyone else was left in limbo and potentially subject to the ban on its effective date of September 4.

Employers who use non-competes outside of these Texas and Florida jurisdictions are now able to breathe a sigh of relief—on August 20, 2024, the United States District Court for the Northern District of Texas issued a final decision finding that the near-complete ban on the use of non-competes was unlawful, and set aside the proposed ban on a nationwide basis, meaning that it cannot be enforced against any employer. Ryan LLC, et al. v. FTC, No. 3:24-CV-00986-E, 2024 WL 3879954 (N.D. Tex. August 20, 2024). And the ban will not take effect as scheduled on September 4, 2024. Note, however, that the FTC will likely appeal the Texas court’s order to the Fifth Circuit Court of Appeals, and thus the lower court will likely not have the final word. Employers should therefore continue to monitor these developments but for now can pause efforts to comply with the rule, including revisions to employment agreements containing non-compete provisions and preparing notices to current and former employees subject to non-competes.

A copy of the Ryan court’s order is here: Order-Granting-SJ-Setting-Aside-Rule-Ryan-v.-FTC-N.D.-Tex.pdf (uschamber.com)

Our prior alert discussing the Rule is here: FTC Issues Long-Awaited Non-Compete Ban (herrick.com)

Our prior alert discussing the preliminary injunction ruling is here: Federal Judge Issues Limited Preliminary Injunction Against FTC Non-Compete Ban (herrick.com)

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For more information on this issue or other employment matters, please contact:

Carol M. Goodman at +1 212 592 1465 or [email protected]
John H. Chun at +1 212 592 1546 or [email protected]
Meaghan Roe at +1 212 592 1632 or [email protected]
Basil C. Sitaras at +1 212 592 1572 or [email protected]

© 2024 Herrick, Feinstein LLP. This alert is provided by Herrick, Feinstein LLP to keep its clients and other interested parties informed of current legal developments that may affect or otherwise be of interest to them. The information is not intended as legal advice or legal opinion and should not be construed as such.