On October 18, 2024, the Federal Trade Commission filed an appeal with the U.S. Court of Appeals for the Fifth Circuit, aiming to overturn the August 2024 ruling from the U.S. District Court for the Northern District of Texas that struck down its proposed noncompete ban. In the case of Ryan LLC v. Federal Trade Commission, the court issued a nationwide permanent injunction, ruling that the FTC had exceeded its rulemaking authority and that the noncompete ban was “arbitrary and capricious.” This ruling followed an earlier preliminary injunction that temporarily blocked the ban’s enforcement for the plaintiffs involved.

What Was at Stake with the FTC Ban?

Originally slated to take effect on September 4, 2024, the FTC’s noncompete ban sought to eliminate most noncompete agreements across the board. It also had the potential to affect non-solicitation agreements and other restrictive covenants, requiring employers to:

• Cease enforcement of existing noncompete clauses

• Notify employees that their noncompete agreements were null and void

Ongoing Litigation: More Challenges Ahead

The FTC’s legal battles don’t stop there. In a separate case, the FTC is appealing a preliminary injunction in Properties of the Villages, Inc. v. FTC, where the U.S. District Court for the Middle District of Florida questioned the FTC’s authority under the major questions doctrine. This doctrine generally requires agencies to have clear congressional authorization for rules with substantial economic impact.

Meanwhile, the plaintiff in ATS Tree Services, LLC v. FTC voluntarily dropped its lawsuit against the FTC’s noncompete ban after the court denied its motion to stay the case pending the outcomes of the Ryan and Properties of the Villages cases.

What Does This Mean for Employers?

For now, the FTC noncompete ban remains blocked, but the battle is far from over. With the Fifth Circuit set to weigh in, and the potential for this issue to reach the Supreme Court, employers should stay vigilant.

Key takeaways:

• Noncompetes may not be common in mortgage, but non-solicitation agreements and confidentiality clauses are widely used. Some of these agreements likely will be affected if the FTC ban is reinstated.

• Employers should monitor state-level regulations and other emerging legal theories such as in antitrust law.

Stay ahead of the curve by reviewing your employment agreements now. For more information or legal guidance, contact Troy Garris at troy@garrishorn.com.