In one of the most highly anticipated employment law decisions this year, on Aug. 20, 2024, the United States District Court for the Northern District of Texas ordered that the Federal Trade Commission’s (FTC) broad non-compete ban (the Final Rule) is unlawful and stopped it from taking effect on Sept. 4, 2024, as had been scheduled. The decision applies nationwide, meaning the FTC’s Final Rule cannot be enforced for employers anywhere in the United States as of now.

On April 23, 2024, the FTC initially voted 3-2 to approve the Final Rule, which would ban post-employment non-compete clauses for all workers, including employees and independent contractors, with a limited exception for existing non-compete agreements already entered into with “senior executives” – a term defined very narrowly. After the effective date of the Final Rule, an employer would not be permitted to enter into a non-compete agreement with any worker, even a senior executive.   

Legal challenges to the Final Rule raged on all summer in different venues, including federal courts in Texas, Pennsylvania, and Florida, with various preliminary outcomes as non-compete proponents vied to halt the Final Rule before it became effective. In the Texas case, Ryan, LLC v. FTC, the Texas federal district court signaled in July that it was likely to block the Final Rule when it granted preliminary relief enjoining the FTC from implementing or enforcing the Final Rule as to the named plaintiffs and plaintiff intervenors in the case. Shortly thereafter, the plaintiffs and plaintiff intervenors filed motions for summary judgment, with the FTC filing a cross-motion for summary judgment.

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