One year has passed since the Federal Trade Commission (“FTC”) announced its controversial Final Rule banning nearly all non-competes on a nationwide basis (the “Non-Compete Rule”).[1] The Non-Compete Rule, which was set to go into effect on September 4, 2024, was challenged by various businesses and trade organizations, including tax-advisory firm Ryan, LLC here in Dallas. Notable suits were filed against the FTC in federal district courts across the country, including by Ryan and the U.S. Chamber of Commerce in Texas, ATS Tree Services, LLC in Pennsylvania, and Properties of the Villages, Inc. in Florida.[2]
As would be expected, the different district courts reached different conclusions about the Non-Compete Rule. The Texas district court preliminarily enjoined enforcement of the Non-Compete Rule as to the plaintiff only pending a final determination on the merits.[3] The Texas court’s final ruling on the merits, issued on August 20, 2024, held that the FTC lacked authority to issue the Non-Compete Rule and that the rule was arbitrary and capricious.[4] Based on that ruling, the Texas court enjoined nationwide enforcement of the Non-Compete Rule.[5]
In contrast, the Pennsylvania district court denied a party’s request to preliminarily enjoin the FTC’s enforcement of the Non-Compete Rule.[6] The Florida district court ruled similarly to the Texas court, although it did adopt some of the Pennsylvania court’s analysis.[7] The FTC appealed the rulings in both the Texas[8]and Florida[9] cases, and the Pennsylvania plaintiff dismissed its suit voluntarily after the Texas court issued its final ruling.[10]
Following the November 2024 election, and as Shields Legal anticipated, Commissioner Andrew N. Ferguson became the new Chair of the FTC, replacing former Chair Lina M. Khan. Ferguson had been vocal in his dissent to the Non-Compete Rule back in 2024, arguing, among other things, that the FTC lacked statutory authority to implement the rule.[11]
In view of the Trump Administration’s new agenda and the leadership change at the FTC, we checked on the status of the two appeals pending before the United States Courts of Appeal for the Fifth[12] and Eleventh Circuits.[13]
On March 12 and March 20, the Fifth Circuit and Eleventh Circuit, respectively, approved the FTC’s request for a 120-day abatement.[14] In the Fifth Circuit case, the parties specifically cited Commissioner Ferguson’s pending review of whether the FTC should continue pursuing the Non-Compete Rule as a basis for the stay.[15] Unless extended further, these abatement periods are set to conclude on July 10 and July 18.
Currently, Commissioner Ferguson’s stance on the two pending appeals remains uncertain. Nonetheless, until the appellate courts issue a ruling, the nationwide injunction prohibiting enforcement of the Non-Compete Rule issued by the Texas district court in the Ryan, LLC case remains in effect.
Stay up to date on news regarding the status of the FTC’s Non-Compete Rule by checking Shields Legal Group’s website for important updates and breaking news.
[1] The FTC’s rule banning non-competes was announced on April 23, 2024, and is located at 16 C.F.R. § 910.1-.6.
[2] Ryan, L.L.C. v. Federal Trade Commission, No. 24-10951, currently pending before the United States Court of Appeals for the Fifth Circuit; ATS Tree Services, LLC v. Federal Trade Commission, No. 24-cv-1743, United States District Court for the Eastern District of Pennsylvania; and Properties of the Villages, Inc. v. Federal Trade Commission, No. 24-cv-316, United States District Court for the Middle District of Florida.
[3] Memorandum Opinion and Order (Doc. 153), Ryan, LLC v. Federal Trade Commission, No. 3:24-cv-00986-E, United States District Court for the Northern District of Texas, at p. 26.
[4] Memorandum Opinion and Order (Doc. 211), Ryan, LLC v. Federal Trade Commission, No. 3:24-cv-00986-E, United States District Court for the Northern District of Texas, at p. 26.
[5] Final Judgment (Doc. 212), Ryan, LLC v. Federal Trade Commission, No. 3:24-cv-00986-E, United States District Court for the Northern District of Texas, at p. 1.
[6] See Memorandum (Doc. 80), ATS Tree Services, LLC v. Federal Trade Commission et al, No. 2:24-cv-01743-KBH, currently pending in the United States District Court for the Eastern District of Pennsylvania, at pp. 35-37
[7] Preliminary Injunction (Doc. 59), Properties of the Villages, Inc. v. Federal Trade Commission, No. 24-cv-316, United States District Court for the Middle District of Florida, at pp. 10-29.
[8] See generally Ryan, L.L.C. v. Federal Trade Commission, No. 24-10951, currently pending before the United States Court of Appeals for the Fifth Circuit.
[9] Notice of Appeal (Doc. 64), Properties of the Villages, Inc. v. Federal Trade Commission, No. 24-cv-316, United States District Court for the Middle District of Florida.
[10] Notice of Voluntary Dismissal by All Plaintiffs (Doc. 92), ATS Tree Services, LLC v. Federal Trade Commission, No. 24-cv-1743, United States District Court for the Eastern District of Pennsylvania.
[11] Dissenting Statement of Commissioner Andrew N. Ferguson Joined by Commissioner Melissa Holyoak, In the Matter of the Non-Compete Clause Rule, Matter Number P201200, June 28, 2024, at p. 1.
[12] See generally Ryan, L.L.C. v. Federal Trade Commission, No. 24-10951, currently pending before the United States Court of Appeals for the Fifth Circuit.
[13] Properties of the Villages, Inc. v. Federal Trade Commission, No. 24-13102, currently pending before the United States Court of Appeals for the Eleventh Circuit.
[14] Order (Doc. 210-2), Ryan, L.L.C. v. Federal Trade Commission, No. 24-10951, currently pending before the United States Court of Appeals for the Fifth Circuit, at p. 1; Order (Doc. 117-2), Properties of the Villages, Inc. v. Federal Trade Commission, No. 24-13102, currently pending before the United States Court of Appeals for the Eleventh Circuit, at p. 2.
[15] See Motion to Hold Appeal in Abeyance for 120 Days (Doc. 205), Ryan, L.L.C. v. Federal Trade Commission, No. 24-10951, currently pending before the United States Court of Appeals for the Fifth Circuit, ¶2-3.
