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Court Blocks Ban on Non-Competes Against Parties to Lawsuit, Refuses to Issue Nationwide Injunction

Friday, July 19, 2024 9:00 AM | Anonymous member (Administrator)

The U.S. Federal Trade Commission (FTC) approved a rule banning most noncompete clauses. The effective date of the rule is September 4, 2024. As SESCO reported, a lawsuit was filed and the Plaintiff, Ryan LLC and later joined by the U.S. Chamber of Commerce, won the case. The Northern District Court of Texas blocked the FTC from enforcing the noncompete rule for Ryan LLC and the U.S. Chamber of Commerce. The court refused to issue a nationwide ban.

Given this result, as well as recent Supreme Court Rulings limiting Federal Agencies’ independence, SESCO does foresee continued challenges on the FTC’s noncompete rule between now and September 4th. SESCO will monitor developments and keep clients and subscribers informed.

As a refresher, the FTC’s rule on noncompete agreements includes:

  • Unless otherwise exempt from the Rule (see below), the Rule makes all noncompete agreements unenforceable and requires employers to provide notice to current and former employees that their noncompete clauses are no longer in effect.
  • The Rule does not apply to nonprofits.
  • The rule rescinds existing noncompete for all workers who are not “Senior Executives.” “Senior Executives” are employees earning over $151,164 who work “in a policy-making position”.
  • Existing noncompete for Senior Executives are not rescinded. New non-compete with Senior Executives entered prior to the effective date are still allowed. However, no new noncompete with Senior Executives may be entered into after the effective date.

For now, the noncompete ban remains scheduled to take effect on September 4, 2024, with respect to all covered employers other than Ryan LLC and the U.S. Chamber of Commerce.

If employers have any questions or concerns, we recommend they contact us to ensure compliance. For assistance, contact us at 423-764-4127 or by email at sesco@sescomgt.com.

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