A federal judge in the Northern District of Texas has enjoined the Federal Trade Commission from implementing its Rule banning non-compete agreements and stayed the effective date of the Rule while the underlying lawsuit against the Rule proceeds, but only with respect to the parties to the lawsuit. 

In doing so, the Court found that the Plaintiffs are likely to win on the merits of their argument, which is that the FTC lacked the statutory authority to implement the Rule.  The Court also held that there is a substantial likelihood that the Rule is arbitrary and capricious because it is unreasonably overbroad without a reasonable explanation and imposes a one-size-fits-all approach with no end date. 

The court also noted that the FTC provided no “rational connection between the facts found [regarding whether such a rule was needed] and the choice made,” and that the evidence put forth by the FTC does not warrant the Rule’s expansive ban.  It is important to emphasize, however, that the judge has limited the scope of the preliminary injunction solely to the implementation or enforcement of the Rule against the Plaintiff and Plaintiff-Intervenors.  However, the court indicated that it intended to issue a merits-based disposition on the challenge to the rule on or before to August 30, 2024. A link to the Court’s decision can be found here.