Update on FTC’s Ban on Non-Compete Agreements

By July 2, 2024 News

McCoy Russell previously covered the Final Rule issued by the Federal Trade Commission (FTC) that invalidates non-compete clauses in standard employment agreements across the United States. The new regulation, detailed in 16 C.F.R. § 910, mandates that employers notify both current and former employees that existing non-compete agreements are now void.

In response to this rule, Ryan, LLC, a tax software and services company, along with several associations including the U.S. Chamber of Commerce, challenged the FTC’s authority to issue such a rule. On July 3, 2024, the Northern District of Texas granted a preliminary injunction against the FTC, citing that the FTC lacks substantive rulemaking authority concerning unfair methods of competition. The preliminary injunction prevents the FTC from enforcing its rule against the plaintiffs in this particular case. The court’s injunction does not necessarily extend to everyone, limiting its scope to the named plaintiffs only.

Considering the limited scope of the injunction, other companies are still obligated to comply with the FTC’s rule by September 4, 2024. This means employers should prepare to notify their employees and adjust their practices in accordance with the new regulation, or consider their own challenge.

McCoy Russell continues to monitor the ongoing legal battles to help inform clients that may need to navigate these changes carefully. The firm will continue to post about the latest court decisions when updates are available.