On October 18, 2024, the Federal Trade Commission (“FTC”) gave notice that it would appeal a Texas federal court’s decision halting its non-compete rule (the “Rule”) from taking effect as to all employers nationwide. The appeal sets the stage for a decision by the conservative Fifth Circuit, which has become a key battleground for challenges to federal rules. 

In August, in Ryan LLC v. Federal Trade Commission, No. 3:24-cv-00986-E (N.D.Tex.), the United States District Court for the Northern District of Texas enjoined enforcement of the Rule nationwide, preventing it from taking effect as intended on September 4, 2024. The court found that the FTC lacked authority to issue the Rule under the FTC Act, and that the near-complete ban on noncompetes imposed by the Rule was arbitrary and capricious. 

On similar grounds, the Florida federal court in Properties of the Villages Inc. v. Federal Trade Commission, No. 5:24-cv-00316 (M.D.Fla), issued a preliminary injunction on August 15, 2024 which enjoined the Rule from taking effect as to the plaintiff in that action, but had not yet reached a final ruling when the decision in Ryan LLC was issued. The FTC has also appealed the Florida court’s decision, which will be determined by the Eleventh Circuit. The Eleventh Circuit has set November 4, 2024 as the deadline for the FTC’s brief in support of its appeal, with Ryan LLC’s opposition due 30 days later.

The outcome of the FTC’s appeals could have significant implications for the future of non-competes in employment contracts nationwide, and will play a key role in defining the scope of the FTC’s regulatory authority. We will keep you apprised of any developments.