On May 7, 2024, the Federal Trade Commission (FTC) issued a Final Rule banning most post-employment non-competes for all workers, except senior executives, employed by for-profit employers. However, recent judicial decisions are stirring up problems for the Final Rule.
Important Court Rulings
On July 3, 2024, in Ryan LLC v. Federal Trade Commission, the U.S. District Court for the Northern District of Texas granted a preliminary injunction, preventing the FTC from implementing or enforcing its blanket ban on noncompete agreements. However, the court declined the request for a nationwide injunction; and thus, the ruling does not affect all other employers subject to the Final Rule with an effective date of September 4, 2024.
In its ruling, the court cited Loper Bright Enterprises v. Raimondo, a Supreme Court case that overruled the doctrine of judicial deference to administrative interpretations of federal laws established in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. Meaning, courts “must exercise their independent judgment in deciding whether an agency has acted within its statutory authority.”
What This Means Going Forward
The district court stated that it intends to rule on the merits of Ryan on or before August 30, 2024, at which point the court could decide to expand its ruling, granting nationwide relief. The court’s reasoning in Ryan together with the Supreme Court’s recent decision in Loper Bright could mean trouble for the Final Rule.
However, employers should remain aware of the increasing judicial scrutiny of non-competes, the recent efforts to restrict the use of non-competes, and state and local legislative proposals seeking to restrict or ban non-competes.
We will continue to follow developments and guidance on this Final Rule. Please contact Dani Smid or your BrownWinick employment attorney with any questions or concerns.
