Update to the Federal Trade Commission’s Ban on Non-Compete Agreements

As we discussed here, the Federal Trade Commission (FTC) issued its Final Non-Compete Clause Rule (Final Rule) on April 23, 2024, which would have almost entirely banned new non-compete agreements in the workplace after the Final Rule’s effective date of September 4, 2024.

Following the narrow preliminary injunction granted by the Northern District of Texas in Ryan, LLC v. Federal Trade Commission on July 3, 2024, the Final Rule’s effective date was delayed solely as to the plaintiffs. However, the same Texas court recently issued a final judgment stating that the FTC exceeded its statutory authority in implementing the “arbitrary and capricious” Final Rule. This decision by the Texas court essentially serves as a nationwide ban on the Final Rule, preventing its enforcement or implementation on September 4, 2024.

According to the Texas decision, employers are no longer required to provide notice to workers that existing non-compete agreements are legally unenforceable. Additionally, employers are again allowed to enter into non-compete agreements with workers so long as the non-compete agreements comply with state law.

While the FTC may choose to appeal the North District of Texas ruling, the ongoing legal battle over the Final Rule will continue to have a significant impact on both employees and employers.