On August 20, 2024, the U.S. District Court for the Northern District of Texas effectively blocked the Federal Trade Commission’s non-compete rule from taking effect. The rule, scheduled to go into effect on September 4, was challenged in federal courts in Texas, Florida and Pennsylvania by various business groups who argued that non-competes are needed to protect business relationships, trade secrets, and other intangible investments. Throughout the summer, inconsistent rulings by these district courts created uncertainty for employers as to whether non-competes would be restricted on a national level.
In Ryan, LLC v. FTC, the Texas court cleared up the ambiguity (at least temporarily) when it concluded that the FTC’s non-compete rule exceeded the agency’s authority and was arbitrary and capricious. The court declared that the rule be set aside, and not enforced on a national level. (See the court’s Memorandum Opinion and Order for more details).
We anticipate that the FTC will appeal the decision to the U.S. Court of Appeals for the Fifth Circuit. However, in the meantime, employers may continue to enforce their non-competes, in accordance with state law, and are no longer required to notify current and former employees that their non-competes are unenforceable.
Martin Browne, will continue to monitor this topic and provide updates as necessary. Our attorneys are on hand to answer your questions and provide guidance on how to navigate your employment-related issues. Please contact Shannon Wahl, Randall Comer, or Steve McCready of Martin Browne’s Labor & Employment Practice group.
This post is not intended as a substitute for professional legal advice. If you have any questions about this information, please contact an attorney at Martin, Browne, Hull & Harper, P.L.L. at 937-324-5541.