FTC Ban on Noncompete Agreements Overturned Nationwide

The FTC’s Rule banning employee non-compete agreements was overturned by the U.S. District Court for the Northern District of Texas yesterday.  Ryan v. FTC, Civil Action 3:24-CV-00986-E. 

Judge Ada E. Brown granted summary judgment to the U.S. Chamber of Commerce and two other associations, finding that the noncompete Rule exceeds the FTC’s statutory authority and that the noncompete Rule is arbitrary and capricious under the Administrative Procedure Act.   The court examined the FTC's authorizing legislation and found that the FTC does not have authority to issue new substantive rules of antitrust law.   The court also found that the Rule is overbroad and lacks “reasonable explanation” for its issuance.  

Judge Brown set aside the Rule entirely, ordering that it cannot be enforced and that the Rule cannot take effect as scheduled on September 4.  The Order applies nationwide.

Clients who otherwise would start on September 4 notifying persons with whom they entered into noncompete agreements that the noncompete agreements will not be enforced are relieved of this requirement, at least until further action is taken by other courts considering the same challenges or the FTC is successful in an appeal.