Court Stays Effective Date of FTC Non-Compete Rule, Declines to Issue Nationwide Injunction

Judge Ada Brown of the U.S. District Court for the Northern District of Texas issued a preliminary injunction staying enforcement of the Federal Trade Commission’s (FTC) proposed final rule (Final Rule) banning most noncompete agreements in the United States. However, the court’s order is fairly limited as it prevents the FTC from enforcing it only against the plaintiffs (Ryan, LLC) before the Court. For all other employers, the Final Rule will still take effect on September 4, 2024, unless halted by pending legal challenges.

HCAOA submitted an amicus brief in support of Ryan LLC’s Motion to Stay the FTC ban, which was granted. The court's decision to grant the injunction was influenced by arguments that the FTC had overstepped its authority under the FTC Act and had not adequately justified its rulemaking under the Administrative Procedures Act. The court highlighted concerns over the FTC’s lack of authority to issue substantive rules, the broad application of the ban without a sunset provision, and insufficient consideration of less intrusive alternatives. As a result, it appears likely that the ban on noncompetes will be struck down for all employers nationwide.

HCAOA will keep membership apprised of further developments.