U.S. Federal Judge Blocks FTC’s Non-Compete Ban

On August 20, 2024, the U.S. District Court for the Northern District of Texas, in Ryan LLC v. Federal Trade Commission, held that the U.S. Federal Trade Commission’s (the “FTC’s”) rule banning most non-compete agreements between workers and employers (the “Non-Compete Rule”) was “unlawful” and “set aside” the Non-Compete Rule. The court ruled, with nationwide effect, that the Non-Compete Rule shall not be enforced or otherwise take effect.

Similar to the court’s earlier Order staying the Non-Compete Rule for the named plaintiffs, the court issued its ruling on the basis that (i) the FTC lacks statutory authority to promulgate the Non-Compete Rule and (ii) the Non-Compete Rule is arbitrary and capricious. The court blocked the Non-Compete Rule that was otherwise scheduled to become effective on September 4, 2024, and rejected the FTC’s argument that any relief should be limited to the named plaintiffs.

While this decision is subject to appeal, it is the first nationwide ruling that declares the Non-Compete Rule to be unlawful. Two other pending U.S. district court cases challenging the Non-Compete Rule in Pennsylvania and Florida have not yet reached a final determination on the FTC’s rulemaking authority.