Judge Blocks Implementation of the FTC Non-Compete Ban Nationwide

On August 20, 2024, the U.S. District Court for the Northern District of Texas issued a nationwide permanent injunction blocking the implementation of the Federal Trade Commission’s (the FTC’s) Final Rule that bans non-compete agreements.

U.S. District Judge Ada E. Brown previously issued a preliminary injunction in July 2024 prohibiting enforcement of the Final Rule with respect to just the named plaintiffs in Ryan LLC v. Federal Trade Commission. However, on August 20, 2024, Judge Brown set aside the Final Rule as “an unlawful agency action” on the grounds that (i) the FTC exceeded its rulemaking authority with respect to the Final Rule, and (ii) the Final Rule is arbitrary and capricious and therefore unlawful. As a result of her ruling this week, the Final Rule will not go into effect on September 4, 2024, as originally planned.

Following the ruling, the FTC stated that it will likely appeal the decision and that it still plans to regulate non-compete agreements on a case-by-case basis through enforcement actions until the appeal is final. In the meantime, employers are encouraged to review their current and go-forward non-compete arrangements with counsel. 

Our Executive Compensation & Employee Benefits and Labor & Employment teams will continue to monitor a potential appeal by the FTC and will provide updates on any further developments. If you have any questions regarding the foregoing, or non-competition or restrictive covenants agreements generally, or would like assistance in evaluating your existing restrictive covenant arrangements, do not hesitate to contact us.

For more details, read our Client Alert and the full opinion below.