On August 20, 2024, a Texas District Court gave employers and employees the long-awaited answer to questions surrounding the enforceability of the Federal Trade Commission’s (FTC) Non-Compete Clause Rule banning non-competition clauses (the “Rule”).[1]
In Ryan LLC v. Federal Trade Commission, the Court set aside the Rule with a nationwide effect.[2]
Consistent with the reasoning stated in its preliminary injunction enjoining enforcement of the Rule,[3] the Court reasoned that “the FTC lacks statutory authority to promulgate the Non-Compete Rule, and that the Rule is arbitrary and capricious.”[4]
The Court’s decision to grant Plaintiffs’ Motion for Summary Judgement and deny the FTC’s Motion for Summary Judgment is appealable. Whether the FTC will continue to push for the non-compete ban through an appeal is undetermined.
For now, non-compete clauses will remain in effect and employers no longer need to comply with the Rule’s September 4, 2024 effective date.
If you need assistance in assessing your business’s non-compete agreements, please contact Andrew Hazen (ahazen@fh2.com; 770-771-6818) or Anne Marie Simoneaux (asimoneaux@fh2.com; 770-771-6811) or visit FH2.com to learn more about how the attorneys at Friend, Hudak & Harris can help.
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[1] For additional discussion about the language of the Rule, see FTC Noncompete Rule: Is My Noncompete Unenforceable? See Non-Compete Clause Rule, 89 Fed. Reg. 38342, 38342–506 (May 7, 2024) [to be codified at 16 C.F.R. pt. 910]. The Rule is available at https://www.federalregister.gov/documents/2024/05/07/2024-09171/non-compete-clause-rule.
[2] Memorandum Opinion and Order at 1–2, 26–27, Ryan LLC v. Federal Trade Commission, No. 3:24-CV-00986-E (N.D. Tex. August 20, 2024).
[3] See Memorandum Opinion and Order at 12–23, Ryan LLC v. Federal Trade Commission, No. 3:24-CV-00986-E (N.D. Tex. July 3, 2024).
[4] Memorandum Opinion and Order, supra note 2, at 26.
