FTC Noncompete Ban Update – Texas Federal Court Enters Limited-Scope Injunction

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On July 3, 2024 United States District Court Judge Ada Brown of the Northern District of Texas issued a limited-scope injunction staying the effective date of the FTC Noncompete Ban (the “Ban”) and barring enforcement of the Ban, but for now that injunction applies only to the named parties in that case.

The Court determined that the plaintiffs and plaintiff-intervenors in the Texas case who are seeking to have the Ban invalidated—namely Ryan LLC, Chamber of Commerce of the United States of America, Business Roundtable, Texas Association of Business, and Longview Chamber of Commerce—likely will be able to succeed in establishing that “the FTC lacks statutory authority to promulgate the [Ban], and that the [Ban] is arbitrary and capricious.” The Court declined to enter a nationwide injunction and declined to extend the stay and injunction to associational members of the named plaintiffs, but the Court clarified that it intends to enter a final decision on the merits of the case on or before August 30, 2024, shortly before the September 4, 2024 effective date of the Ban.

Despite the limited scope of the present injunction, the Court’s opinion suggests that it likely ultimately will rule that the FTC exceeded its authority in promulgating the Ban, which in turn would result in the broader invalidation of the Ban pending appeals.

The attorneys of Maynard Nexsen’s Employment and Labor group will continue to monitor any developments and appeals related to the FTC Noncompete Ban and are available to discuss any questions you may have.