In April, the Federal Trade Commission voted, three to two, to prohibit post-employment noncompete agreements with workers (discussed in this April 2024 Cooley Alert). With some exceptions, the prohibition would have banned virtually all post-employment noncompete agreements in the U.S. beginning on September 4, 2024. But, as discussed in this timely new Cooley Alert, Texas Court Blocks FTC’s Noncompete Ban, from our Labor and Employment group, on August 20, 2024, the Northern District of Texas in Ryan LLC v. Federal Trade Commission issued an order blocking the FTC rule banning all post-employment noncompete agreements from taking effect. As a result, the Alert concludes, “for the time being, employers using noncompetes may continue to utilize them, subject to applicable state laws.”
As discussed in the Alert, summary judgment was granted in favor of the plaintiffs on the grounds that the FTC exceeded its statutory authority in adopting the rule and that the rule was arbitrary and capricious under the Administrative Procedure Act. (Sound familiar? See this PubCo post.) Because the court found the agency to have acted unlawfully in its rulemaking, it “held that the appropriate remedy under the APA was to set the rule aside.” That is, according to the new Alert, “[u]nlike the court’s preliminary injunction ruling in early July, which enjoined the rule as to only the five plaintiffs in the case, Judge Ada Brown’s most recent merits decision blocked the rule from taking effect on a nationwide basis. Therefore, all employers using noncompete agreements will not be subject to the ban on September 4, and will not need to comply with the rule’s notice and other requirements.” What’s next? Will the FTC appeal?
Be sure to check out the new Alert!
