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On August 20, 2024, the U.S. District Court for the Northern District of Texas issued an order to block the Federal Trade Commission’s (FTC) noncompete ban. It was previously on hold in the Ryan LLC v. FTC case but only for the plaintiffs. The most recent ruling blocks the ban for all employers, preventing its implementation from taking effect on September 4, 2024, or later.
Background
On May 7, 2024, the FTC issued a final rule prohibiting most employers from using or enforcing noncompete clause with most employees. This rule invalidated existing noncompete agreements and required employers to inform employees that these agreements would not be enforced. The FTC rule would have established federal guidelines for noncompete clauses, superseding state laws.
Court Case
In Ryan, the court ruled on August 20, 2024, agreeing with plaintiffs that the FTC lacks authority to enforce the noncompete ban, deeming it unconstitutional and arbitrary. As a result, the ban is permanently blocked for all employers and will not take effect on September 4, 2024.
Current Impact
Given the recent ruling in Texas, employers can currently refrain from taking immediate action to void existing noncompetes, revise agreements, or issue notifications. They can also continue to rely on state-level guidance concerning the validity of noncompete agreements. However, it is important to note that the FTC may appeal the decision, so employers should continue to monitor for updates in this case. Download the bulletin for more details.
National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.
