Earlier this week, FOS sent out a Client Alert to help clients prepare for the F.T.C.’s final rule (the “Rule”) banning most noncompete agreements in employment contracts, which was set to take effect September 4th, 2024. https://foslaw.com/what-to-know-before-the-september-4th-effective-date-of-the-ftcs-noncompete-ban/ We noted various lawsuits challenging the Rule’s validity, and now we have a ruling.
Yesterday, August 20th, 2024, the court in Ryan LLC v. F.T.C. (N.D. Texas) issued an order setting aside the Rule nationwide. This is in contrast to a Pennsylvania court (ATS Tree Services LLC v. F.T.C.), which refused to stay or enjoin enforcement of the Rule, pending that case’s resolution, as well as a Florida case (Properties of the Villages, Inc. v. F.T.C.) which enjoined enforcement only as to those particular plaintiffs.
As a result of the Ryan decision, the Rule will not take effect on September 4th, 2024. This also means that employers are not – at the moment – required to notify current and former employees with existing noncompete agreements that the covenants will no longer be enforced.
However, employers should note that the Ryan decision may not be the final word on the validity of the Rule, as the F.T.C. can appeal the court’s judgment, which is likely. For the foreseeable future, however, employers can continue business as usual with respect to noncompete agreements.
FOS will continue monitoring developments as challenges to the Rule work their way through the appellate system. In the meantime, contact your FOS attorney with questions about the Ryan court’s decision, the FTC Rule, noncompete agreements, and other employment law issues.
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