On August 20, 2024, Judge Ada Brown of the U.S. District Court for the Northern District of Texas issued a permanent injunction setting aside the Federal Trade Commission’s final rule banning non-compete agreements in Ryan LLC v. FTC. Last month, the court afforded temporary relief as to the named plaintiffs only by issuing a preliminary injunction enjoining the rule’s application against them. In its most recent decision, the court specified that its ruling has permanent, nationwide effect. An appeal is likely to follow.

Set to take effect on September 4, 2024, as previously discussed here, the final rule would have prohibited enforcement of non-compete covenants with respect to nearly all U.S. workers and would have required employers to notify affected workers that their non-competes are unenforceable. The rule provided only limited exceptions for non-competes entered into with “Senior Executives” (as defined in the rule) prior to the rule’s effective date and non-competes entered into in connection with the sale of a business. In reaching its decision, the Texas court ruled that the FTC lacks substantive rulemaking authority as to unfair methods of competition, and that the FTC’s promulgation of the final rule was arbitrary and capricious because it was unreasonably overbroad and lacked reasonable explanation.

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