Breaking News — FTC Rule on Non-Competes Will Not Take Effect on September 4

On August 20, 2024, the federal court in Ryan, LLC. V. FTC, a case in the Northern District of Texas, set aside the FTC Non-Compete Clause Rule nationwide.  The Ryan court held that (1) the FTC exceeded its statutory authority in implementing the Rule, and (2) the Rule is arbitrary and capricious.  Therefore, the Rule shall not be enforced or otherwise take effect on its effective date of September 4, 2024, or thereafter. 

Unlike its prior ruling, the Ryan court made it clear that this ruling is not limited to the Plaintiffs but instead applies to all businesses across the country that would have been covered by the Rule.  Consequently, businesses do not need to take any immediate action regarding their non-compete or other restrictive covenant agreements that the Rule otherwise would have required.  If, however, businesses sent out notices early or revised their agreements, they may consider reversing those early actions.

Keep in mind, the FTC may appeal the decision to the 5th Circuit Court of Appeals but based on prior rulings, it does not seem likely this would lead to a reversal.  Also, as noted in our August 12, 2024, blog post, the ATS Tree Services LLC v. FTC and Properties of Villages Inc. v. FTC cases are still pending, so there is a possibility for inconsistent rulings.  The appellate courts including the U.S. Supreme Court might need to resolve this issue in the future.

Williams Parker is closely monitoring developments and will provide updates as they become available.