FTC Noncompete Rule Put on Limited Hold

FTC Noncompete Rule Put on Limited Hold

In an opinion published July 3, 2024, a Texas federal judge issued an injunction against the Federal Trade Commission’s rule banning noncompete agreements, but only as applied to the plaintiffs in that action. Readers will recall that the FTC rule would have gone into effect on September 4, 2024, and the judge’s order postpones that effective date and prohibits the FTC from implementing or enforcing the noncompete rule, but only as applied to the parties in the lawsuit.

The Court further stated that it intends to enter a full ruling on the entire action on or before August 30, 2024, strongly telegraphing that the Court intends to strike down the entire rule. The Court stated that “the text, structure, and history of the FTC Act reveal that the FTC lacks substantive rulemaking authority with respect to unfair methods of competition”, strongly suggesting that the Court is going to strike down the rule.

However, the Court was also clear that it was not issuing a nationwide injunction.  Instead, it limited its injunction to the effective date of the rule “as applied to the Plaintiffs.” Therefore, unless you are Ryan, LLC (the original plaintiff), Chamber of Commerce of the United States of America, Business Roundtable, Texas Association of Business, or Longview Chamber of Commerce, the injunction does not technically apply to you.

There will be plenty of discussion as to whether this ruling gets applied nationally, but that has not happened yet. We will continue to monitor this developing issue.  In the meantime, if you have questions, please contact the Firm.