Texas Federal Judge Preliminarily Blocks Enforcement of FTC Non-Compete Rule

July 8, 2024

On July 3, 2024, U.S. District Judge Ada Brown from the Northern District of Texas issued a decision, and subsequently a preliminary injunction, staying enforcement of the Federal Trade Commission’s (“FTC”) non-compete ban (the “Rule”). The injunction currently is limited to the plaintiff (Ryan, LLC) and plaintiff-intervenors (the U.S. Chamber of Commerce, Business Roundtable, Texas Association of Business, and Longview Chamber of Commerce). The court stated that it will issue a final merits determination by August 30, 2024, just a few days before the Rule’s anticipated September 4 effective date.

As previously covered, the Rule would prospectively ban all non-competes with workers and render virtually all existing non-competes with workers unenforceable. Judge Brown, however, held that the FTC lacked statutory authority to issue the Rule and that the Rule was arbitrary and capricious—i.e., not warranted by the evidence the FTC claimed it relied on.

We will continue to monitor this case and another pending challenge to the Rule brought by ATS Tree Services, LLC, in the Eastern District of Pennsylvania. The judge in that case, a Biden appointee, stated that the court would issue a ruling by July 23. A decision that conflicts with Judge Brown’s will surely cause confusion.

If you have any questions about how these developments impact your agreements, please contact David Baron, Anne C. Patin or your relationship partner at the Firm.