On August 20, 2024, in the long awaited decision of Ryan, LLC v. Federal Trade Commission, (Civil Action No. 3:24-CV-00986-E, Northern District of Texas Dallas Division), United States District Judge Ana E. Brown set aside the Federal Trade Commission (“FTC”) rule (the “FTC Rule”), which generally would have banned non-compete provisions, effective September 4, 2024. Specifically, the FTC Rule, with certain limited exceptions, would have prohibited any “contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment with the employer.”
With this decision, the FTC Rule “shall not be enforced or otherwise take effect on its effective date of September 4, 2024 or thereafter.” In so holding, Judge Brown stated “In sum, the Court concludes that the FTC lacks statutory authority to promulgate the Non-Compete Rule, and that the Rule is arbitrary and capricious. Thus, the FTC’s promulgation of the Rule is an unlawful agency action.”
This decision is a huge sigh of relief for employers, who now will not have to notify employees that the non-compete provisions to which they previously agreed are unenforceable (which would have been required under the FTC Rule by the September 4 effective date). Our Employment Practice Group will continue to monitor any developments regarding this decision and the FTC Rule, and will provide updates accordingly.