In a highly anticipated ruling yesterday, the Northern District of Texas issued a final order, which enjoined and set aside the FTC’s Noncompete ban (the “Rule”). See Ryan, LLC v. FTC, No. 3:24-cv-00986-E (N.D. Tex. 2024). Finding the Rule arbitrary and capricious and promulgated in excess of the FTC’s statutory authority, the Ryan Court held the Rule unlawful and set it aside.

Nelson Mullins has been tracking the Rule and subsequent challenges before the Ryan Court and in other jurisdictions since April. Recently, in ATS Tree Services, LLC v. TTC, the Eastern District of Pennsylvania denied injunctive relief, finding the plaintiff was unable to demonstrate irreparable harm and was also unlikely to succeed in demonstrating that the FTC lacked constitutional or statutory authority to implement the Rule. See ATS Tree Services, LLC v. FTC, No. 2:24-cv-1743 (E.D. Pa. 2024).

On Aug. 14, the Middle District of Florida enjoined the Rule as to the named plaintiff only. See Properties of the Villages, Inc. v. FTC, No. 5:24-cv-316, (M.D. Fla. 2024). In its order, the Villages Court found that the FTC’s Rule implicated the “major questions doctrine,” where a federal administrative agency must “point to clear congressional authorization for the power it claims” when it “claims to have the power to issue rules of extraordinary economic and political significance.”

Based on yesterday’s final order by the Ryan Court, the Rule, which was slated to become effective on Sept. 4, 2024, is now set aside, meaning it will no longer become effective absent further judicial order. Accordingly, employers should refrain from taking any further action in relation to the Rule.

Nelson Mullins will be posting additional guidance in the wake of the Ryan decision, and will also continue monitoring other ongoing legal challenges that may impact the Rule. Employers should consult with counsel before taking any action under the Rule.