Our Firm previously reported on the Federal Trade Commission’s Non-Compete Rule, which would have made most non-compete agreements in the United States unenforceable as of its upcoming effective date of September 4, 2024. Our previous Legal Briefing from July, 2024 on the Non-Compete Rule can be found here:
As noted in the previous Briefing, litigation was commenced to invalidate this new Rule. The primary case has been litigated in the United States District Court for the Northern District of Texas – the case of Ryan LLC (and the Chamber of Commerce of the United States of America, Business Roundtable, Texas Association of Business, and Longview Chamber of Commerce) v. Federal Trade Commission. In July, the Court in this matter granted the Plaintiff’s motion for a preliminary injunction and postponed the effective date of the new rule, but only as applied to the specific Plaintiffs who commenced the case. The Court in this matter, however, promised to rule on the ultimate merits of the Non-Compete Rule on or before August 30, 2024, which it did on August 20, 2024 when it issued an Order noting as follows:
“In sum, the Court concludes that the FTC lacks statutory authority to promulgate the Non-Compete Rule, and that the Rule is arbitrary and capricious. Thus, the FTC’s promulgation of the Rule is an unlawful agency action.”
“The Non-Compete Rule, 16 C.F.R. § 910.1–.6, is hereby SET ASIDE and shall not be enforced or otherwise take effect on September 4, 2024, or thereafter.”
Judge Ada E. Brown’s decision in the Ryan LLC matter renders her previous injunctive relief permanent and it is now nationwide in scope rather than just applying to the specific named Plaintiffs in this matter. A copy of the full Order can be found at the following site:
It is also significant to point out that a second court in the United States District Court for the Middle District of Florida in mid-August, 2024 also preliminarily enjoined enforcement of the Non-Compete Rule for just the Plaintiffs in that matter. A third decision from the Eastern District of Pennsylvania did find in favor of the FTC previously, but the Ryan LLC decision rendered on August 20, 2024 will have the greatest impact for now – and it has the backing of the U.S. Chamber of Commerce.
Following the Ryan LLC decision on August 20, 2024, FTC spokesperson Victoria Graham generally stated that the FTC is seriously considering a potential appeal, and that the decision does not prevent the FTC from addressing noncompetes through case-by-case enforcement actions.
As this matter will likely be appealed, potentially even to the U.S. Supreme Court, this story will continue to unfold. It is significant to note that this is a federal determination and will not directly impact state non-compete laws or prohibitions at this time.
Our firm has extensive experience counseling individuals, businesses, and others on statutory and regulatory requirements, as well as preparing and implementing applicable policies. If you have any questions related to this Legal Briefing, please contact any member of our firm at 585-730- 4773.
This Legal Briefing is intended for general informational and educational purposes only and should not be considered legal advice or counsel. The substance of this Legal Briefing is not intended to cover all legal issues or developments regarding the matter. Please consult with an attorney to ascertain how these new developments may relate to you or your business. © 2024 Law Offices of Pullano & Farrow PLLC
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