{"id":7828,"date":"2024-08-22T17:21:57","date_gmt":"2024-08-22T21:21:57","guid":{"rendered":"https:\/\/employerdefensereport.com\/?p=7828"},"modified":"2026-03-20T11:56:58","modified_gmt":"2026-03-20T15:56:58","slug":"federal-court-vacates-ftcs-non-compete-rule","status":"publish","type":"post","link":"https:\/\/www.connmaciel.com\/employer-defense-report\/federal-court-vacates-ftcs-non-compete-rule\/","title":{"rendered":"Federal Court Vacates FTC\u2019s Non-Compete Rule"},"content":{"rendered":"

By Jordan B. Schwartz<\/a><\/p>\n

As readers of this blog know, this past Spring<\/a>, the Federal Trade Commission (FTC) issued its final\u00a0Non-Compete Clause Rule<\/a>\u00a0(the \u201cNon-Compete Rule\u201d) in late April 2024, purporting to ban nearly all employment-related non-compete agreements.\u00a0 \"Shutterstock<\/a>Under the Non-Compete Rule, which was scheduled to take effect on September 4, 2024, an employer generally would have been prohibited from entering or attempting to enter into a non-compete with a worker, maintaining a non-compete with a worker, or representing to a worker that the worker was subject to a non-compete. The Non-Compete Rule also would have required employers to cease enforcement of existing non-competes (aside from agreements with Senior Executives, as defined by the Rule) and actively inform workers that existing non-compete clauses would no longer be enforced.<\/p>\n

The FTC\u2019s announcement of the Non-Compete Rule sparked immediate legal challenges.\u00a0 As a result, since that time, those of us in the employment law legal community have been waiting on pins and needles for a decision regarding the validity of the Rule, so that we could effectively guide and counsel our clients accordingly.\u00a0 Finally, that time has now arrived.<\/p>\n

On Tuesday, August 20, 2024, Judge Ada E. Brown of the U.S. District Court for the Northern District of Texas, granted summary judgment for Ryan LLC and, in so doing, vacated the Non-Compete Rule.\u00a0 The plaintiff in this case, a tax services firm called Ryan LLC (along with the U.S Chamber and Commerce and other intervenor plaintiffs who joined Ryan), had challenged the FTC\u2019s authority to issue the Non-Compete Rule banning the use of non-compete agreements across the country and sought summary judgment against the FTC.<\/p>\n

In granting Ryan\u2019s motion for summary judgment, Judge Brown held, in no uncertain terms, that \u201cthe Rule shall not be enforced or otherwise take effect on its effective date of September 4, 2024 or thereafter.\u201d\u00a0 Importantly, Judge Brown\u2019s decision nullifies the Non-Compete Rule nationwide, not just for the plaintiffs in the lawsuit, as was the case when she granted the plaintiffs\u2019 motion for a preliminary injunction in early July.<\/p>\n

In her decision, Judge Brown found, among other things, that the FTC\u2019s promulgation of the Non-Compete Rule was in excess of its statutory authority and was an arbitrary and capricious \u201ccategorical ban\u201d that violated the Administrative Procedure Act.\u00a0 In reaching that conclusion, Judge Brown rejected the FTC’s arguments that amendments to the FTC Act in recent years allowed it to create such a substantive rule, calling the FTC’s arguments \u201ca piecemeal attempt to confer rulemaking authority that Congress has not affirmatively granted to the FTC.\u201d<\/p>\n

Notably, while Judge Brown acknowledged that Congress vested the FTC with the power to prevent unfair methods of competition, she concluded that the plain reading of Section 6(g) of the FTC Act did not provide the FTC with any authority to create \u201csubstantive rules regarding unfair methods of competition.\u201d\u00a0 Accordingly, this decision does not simply vacate the Non-Compete Rule on a narrow basis.\u00a0 Rather, it curtails the FTC\u2019s overall attempt to expand its rulemaking authority beyond its traditional consumer protection regulations and into a new category that it had deemed \u201cunfair methods of competition,\u201d which is welcome news for employers who want to continue to keep using \u2013 and enforcing \u2013 non-compete agreements.<\/p>\n

The U.S. Chamber of Commerce praised the court’s decision, stating that it is a \u201csignificant win in the Chamber\u2019s fight against government micromanagement of business decisions,\u201d and that the Non-Compete Rule was an \u201cunlawful extension of power that would have put American workers, businesses and our economy at a competitive disadvantage.\u201d<\/p>\n

On the other side of the coin, a spokeswoman for the FTC stated that the agency was disappointed by the decision and would \u201ckeep fighting to stop non-competes that restrict the economic liberty or hardworking Americans, hamper economic growth, limit innovation and depress wages.\u201d\u00a0 She further stated that the FTC is \u201cseriously considering a potential appeal\u201d and that the \u201cdecision does not prevent the FTC from addressing non-competes through case-by-case enforcement actions.\u201d<\/p>\n

It is worth nothing, however, that even if the FTC does appeal, it is unlikely that such an appeal would be successful, either in the conservative leaning Fifth Circuit, or at the U.S. Supreme Court, especially given the current make-up of the Court.\u00a0 As a result, the Non-Compete Rule will not take effect, at least for the foreseeable future.<\/p>\n

Thus, for employers who were scrambling to comply with the requirements of the Non-Compete Rule and, in particular, its notice requirements, those efforts should cease immediately.\u00a0 In other words, employers should proceed as if the Non-Compete Rule never existed.\u00a0 Accordingly, employers should not<\/u><\/strong> notify workers that existing non-compete clauses will no longer be enforced, as would have been required under the Non-Compete Rule.\u00a0 Employers also should not<\/u><\/strong> modify existing non-competes in an effort to comply in any way with the now invalidated Non-Compete Rule.<\/p>\n

That being said, there is still a nationwide trend against the use of non-competes.\u00a0 Indeed, in recent years, more and more states have either invalidated or at least curtailed non-compete agreements.\u00a0 Thus, it is imperative that company representatives know \u2013 and follow \u2013 the relevant and applicable state laws and monitor any new legal developments that could impact the validity of your company\u2019s non-compete agreements or other restrictive covenants.<\/p>\n

We will continue to monitor and keep you apprised of all developments relating to this important issue.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Jordan B. Schwartz As readers of this blog know, this past Spring, the Federal Trade Commission (FTC) issued its final\u00a0Non-Compete Clause Rule\u00a0(the \u201cNon-Compete Rule\u201d) in late April 2024, purporting to ban nearly all employment-related non-compete agreements.\u00a0…<\/p>\n","protected":false},"author":22,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_price":"","_stock":"","_tribe_ticket_header":"","_tribe_default_ticket_provider":"","_tribe_ticket_capacity":"","_ticket_start_date":"","_ticket_end_date":"","_tribe_ticket_show_description":"","_tribe_ticket_show_not_going":false,"_tribe_ticket_use_global_stock":"","_tribe_ticket_global_stock_level":"","_global_stock_mode":"","_global_stock_cap":"","_tribe_rsvp_for_event":"","_tribe_ticket_going_count":"","_tribe_ticket_not_going_count":"","_tribe_tickets_list":"[]","_tribe_ticket_has_attendee_info_fields":false,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[817],"tags":[826,862,850],"class_list":["post-7828","post","type-post","status-publish","format-standard","hentry","category-ai-technology-privacy-data-security","tag-policy-handbooks","tag-rulemaking-advocacy","tag-trade-secrets-non-competes"],"acf":[],"yoast_head":"\nFederal Court Vacates FTC\u2019s Non-Compete Rule - Employer Defense Report<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.connmaciel.com\/employer-defense-report\/federal-court-vacates-ftcs-non-compete-rule\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Federal Court Vacates FTC\u2019s Non-Compete Rule - Employer Defense Report\" \/>\n<meta property=\"og:description\" content=\"By Jordan B. Schwartz As readers of this blog know, this past Spring, the Federal Trade Commission (FTC) issued its final\u00a0Non-Compete Clause Rule\u00a0(the \u201cNon-Compete Rule\u201d) in late April 2024, purporting to ban nearly all employment-related non-compete agreements.\u00a0…\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.connmaciel.com\/employer-defense-report\/federal-court-vacates-ftcs-non-compete-rule\/\" \/>\n<meta property=\"og:site_name\" content=\"Employer Defense Report\" \/>\n<meta property=\"article:published_time\" content=\"2024-08-22T21:21:57+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-03-20T15:56:58+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.connmaciel.com\/employer-defense-report\/wp-content\/uploads\/sites\/2\/2024\/08\/shutterstock_521375734-scaled.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"2560\" \/>\n\t<meta property=\"og:image:height\" content=\"1230\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Jordan B. 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