by Employers working on plans to send notices to current and former employees regarding the status of any non-compete clauses in their employment agreements can redeploy their resources to other projects. The nationwide ban on most non-compete agreements, set to take effect on September 4, 2024, has been blocked.
On August 20, 2024, the U.S. District Court for the Northern District of Texas set aside the Federal Trade Commission’s (FTC) rule prohibiting most non-compete agreements with employees. The Court found that the FTC had exceeded its authority in issuing its rule.
The case before the Court was Ryan, LLC v. Federal Trade Commission. In early July, the Court granted a preliminary injunction staying the rule’s enforcement against the plaintiffs in the lawsuit. The Court’s August 20th action is a final decision that blocks the rule’s enforcement nationwide.
The FTC is expected to appeal the District Court ruling to the Fifth Circuit Court of Appeals. If the agency appeals, the process will likely take months, if not years, to complete the federal appeals process.
Employers should remember that this federal court decision is limited to the question of the FTC’s ban on non-compete agreements. It does not affect an employer’s obligations to comply with state laws limiting or banning non-compete agreements.
