The Federal Trade Commission (FTC) Rule banning nearly all post-employment non-compete agreements has been vacated, so will not be going into effect on September 4, 2024.
On August 20, 2024, the U.S District Court for the Northern District of Texas in Ryan, LLC v. FTC issued an Order on a Motion for Summary Judgment in which the Court vacated the FTC Rule. Specifically, the Court states: “The Court sets aside the Non-Compete Rule. Consequently, the Rule shall not be enforced or otherwise take effect on its effective date of September 4, 2024 or thereafter.”
This decision provides welcome clarity in the face of rising uncertainty for employers in connection with the impending effective date of the FTC Rule. While that effective date (September 4, 2024) was fast-approaching, courts (including the Ryan, LLC Court in a preliminary injunction decision) had issued conflicting decisions as to whether the FTC had exceeded its authority in issuing the Rule. As a result of these conflicting decisions, employers were placed in a quandary whether they should follow the Rule by issuing a required notice to individuals subject to existing non-compete agreements that stated those agreements were no longer effective, or not follow the Rule and risk being in violation. The Ryan, LLC decision, which vacates the Rule on a nationwide basis, alleviates that uncertainty at least for the time being.
In the absence of a contrary order from an appellate court, the Texas federal court’s vacation of the FTC Rule means that employers will not need to provide the notices required under the Rule or otherwise abide by the FTC Rule.
We will be monitoring potential appeals or other steps in connection with the FTC Rule. For now, however, and in the meantime, employers and employees should still abide by applicable state laws concerning the enforcement of non-compete agreements.