On August 20, 2024, in Ryan, LLC v. FTC the U.S. District Court for the Northern District of Texas struck down the Federal Trade Commission’s (FTC) final rule prohibiting non-competition agreements with workers. The Court determined that the FTC had exceeded its rulemaking authority with respect to unfair methods of competition, that the rule was arbitrary and capricious, and overly broad. Accordingly, the Court found the rule, which would have taken effect on September 4, 2024, unlawful and set it aside on a nationwide basis.
The FTC had voted, in April of 2024, to adopt the proposed final rule, which would have effectively banned all non-compete agreements and prohibited employers from enforcing or attempting to enforce a pre-existing non-compete agreement (with limited exceptions) or representing that an employee is subject to a non-compete clause.
The rule will not go into effect (as of now) and employers are not required to discontinue the use of non-compete agreements or take other action(s) as required by the rule. Importantly, however, the FTC may appeal the ruling to the Fifth Circuit and the ruling has no effect on existing state laws related to non-compete agreements.
The legal landscape regarding non-compete agreements is evolving at a rapid pace. As an employer or employee, it is important to know your rights and obligations with respect to non-compete agreements and other applicable employment laws.
Have a question about non-compete agreements or more general employment law matters? If so, contact an employment attorney at Semeraro & Fahrney, LLC today at 973-988-5070.
