As you know, PERKS has been closely following the fate of the Federal Trade Commission’s (“FTC”) rule banning most employee and independent contractor non-competes (the “Rule”) and now there is a major update:
Yesterday, August 20, 2024, a federal court in Texas struck down the Rule nationwide, finding that the FTC exceeded its statutory authority in promulgating the Rule and that the Rule is arbitrary and capricious. See the court’s decision here: Order-Granting-SJ-Setting-Aside-Rule-Ryan-v.-FTC-N.D.-Tex.pdf
Unlike the court’s July preliminary injunction ruling, which granted relief solely to the plaintiffs in the case, this decision, on its face, applies to all businesses across the country that otherwise would have been subject to the Rule.
The court determined that, in light of its findings, the proper remedy under the Administrative Procedure Act (“APA”) is to hold the Rule unlawful in its entirety and set it aside. Pursuant to the court’s ruling, “the Rule shall not be enforced or otherwise take effect on its effective date of September 4, 2024, or thereafter.”
While this decision is a meaningful win for opponents of the Rule, an appeal of this decision to the Fifth Circuit is likely, and there is also a competing case in Pennsylvania that appears primed to come out in favor of the Rule, setting up a potential review by the Supreme Court.