Important Update: FTC Non-Compete Rule Struck Down

Hello and welcome back!

In our previous discussion about the Federal Trade Commission’s (FTC) ban on the enforcement of non-compete provisions, we outlined the potential impact of this sweeping regulation. Since then, significant developments have occurred, and we’re here to update you on the latest in this unfolding legal saga.

Court Decision Blocks FTC Non-Compete Rule

On August 20, 2024, the U.S. District Court for the Northern District of Texas delivered a pivotal ruling in the case Ryan, LLC v. FTC. The court granted the Plaintiff’s motion for summary judgment, deeming the FTC’s non-compete rule unlawful. This decision effectively halts the implementation of the rule, which was set to take effect on September 4, 2024.

The court’s ruling marks a substantial setback for the FTC, as it found the agency lacked the substantive rulemaking authority to impose such a ban under the guise of regulating unfair methods of competition. This decision curtails the FTC's authority nationwide, creating uncertainty about future enforcement of non-compete agreements.

What’s Next for the FTC?

The next steps for the FTC remain unclear. The agency may choose to appeal the decision to the U.S. Court of Appeals for the Fifth Circuit, and potentially to the Supreme Court. Notably, both the Fifth Circuit and the Supreme Court have recently curtailed the power of federal agencies, which could influence the outcome of any appeal.

Implications of Potential Appeal

If an appeal succeeds, the implications could be vast. The FTC’s proposed ban on non-compete agreements had the potential to impact approximately 30 million American workers. Proponents argued it would spur innovation and increase worker earnings, while critics expressed concerns about the effect on companies’ ability to retain talent and manage their workforce.

What Should Employers Do Now?

In light of the court's ruling, employers should hold off on making changes to their non-compete policies for the time being. However, it’s crucial to stay vigilant and keep abreast of any further developments, including potential appeals or new regulations.

Stay Informed

We will continue to monitor this situation and provide updates as they arise. For now, consider reaching out to Stock Legal to review your current non-compete agreements and prepare for any possible changes in the legal landscape.