Texas Court Ruling Deals Blow to FTC Non-Compete Rule

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  • The FTC’s Final Rule banning non-compete clauses in employment agreements has been struck down by a federal judge in the Northern District of Texas.
  • In Ryan LLC v. FTC (Civil Action No. 3:24-CV-00986-E), the court issued an order granting the plaintiffs’ motion for summary judgment and finding that the FTC exceeded its statutory authority in promulgating the Final Rule, as the agency lacks substantive rulemaking power under the FTC Act regarding unfair methods of competition. Additionally, the court ruled the Final Rule arbitrary and capricious because the evidence did not support it and the agency failed to consider alternatives.
  • This ruling extends beyond the earlier preliminary injunction, which was limited to the plaintiffs, and effectively blocks the rule nationwide. For more details on the court’s ruling and its implications for employers, check out this alert from our colleagues in Cozen O’Connor’s labor and employment group.
  • We have also previously covered Democratic AGs’ submitting letters in support of the FTC’s proposed rule on non-competes.
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