08/23/2024 | News release | Distributed by Public on 08/23/2024 09:31
On August 20, 2024, the United States District Court for the Northern District of Texas issued an order blocking the FTC's rule banning non-competes in certain situations (the "Non-Compete Rule"). The Non-Compete Rule was scheduled to take effect on September 4, 2024; however, in Ryan, LLC v. Federal Trade Commission, the court has now set aside the Non-Compete Rule on a nationwide basis. Employers can rest easy for now and may continue to use non-competes with employees in accordance with state laws.
How Did We Get Here?
Earlier this summer, the Ryan court temporarily enjoined the Non-Compete Rule but declined to extend that ruling beyond the plaintiffs in that particular case. Subsequently, a different federal court in Pennsylvania sided with the FTC, finding the FTC had the authority to issue the Non-Compete Rule and that the plaintiff had failed to show it would be irreparably harmed by the Non-Compete Rule. Then, just last week, the Middle District of Florida agreed with Texas and blocked the Non-Compete Rule, but only as to the specific plaintiff in the case.
The Ryan Court Ruling
The Ryan court has now provided some certainty (at least temporarily) to employers after an unsettled summer, finding that (1) the Non-Compete Rule exceeded the FTC's statutory authority because the FTC is only authorized by Congress to issue procedural rules, but not substantive rules, and (2) the Non-Compete Rule is arbitrary and capricious because it is unreasonably overbroad without a reasonable explanation for its breadth.
What's Next?
The FTC will likely appeal the Ryan court's decision to the Fifth Circuit, which is historically employer-friendly and is unlikely to side with the FTC. After that, the next step would be to take the fight to the Supreme Court.
What Employers Should Do Now
If you have any questions, please do not hesitate to reach out to a member of the Morris, Manning & Martin, LLP Employment Team.