FTC Files Multiple Appeals Seeking to Set Aside Injunctions Blocking the FTC Final Rule Non-Compete Ban

On October 18, 2024, the Federal Trade Commission (FTC) filed a notice of appeal seeking to set aside the August 20, 2024 Order issued by the U.S. District Court for the Northern District of Texas in Ryan LLC v. Federal Trade Commission. The FTC’s appeal seeks to set aside the permanent injunction blocking the FTC from enforcing its proposed non-compete ban. From the August 20, 2024 Order, the judge concluded that the FTC’s Final Rule was “arbitrary and capricious,” and unlawful. The FTC’s appeal in Ryan LLC will be heard by the U.S. Circuit Court of Appeals for the Fifth Circuit.

On similar grounds, the FTC appealed the August 15, 2024 Order issued by the U.S. District Court for the Middle District of Florida in Properties of the Villages Inc v. Federal Trade Commission, which had granted a preliminary injunction barring the non-compete ban from taking effect against the plaintiff in that case. Similar to Ryan LLC, the Court reasoned that the FTC’s action was likely improper due to lack of clear congressional authorization when it issued the non-compete ban. This appeal will be decided by the U.S. Circuit Court of Appeals for the Eleventh Circuit.

With appeals now pending before the Fifth and Eleventh Circuits, a circuit split could result in an eventual Supreme Court ruling. In the meantime, employers can continue to utilize restrictive covenants to prevent unfair competition and protect confidential information, subject to the laws of each state. That said, employers should continue to exercise caution and consider narrowly tailoring restrictive covenants, which can help limit risk of the covenant being unenforceable.

The attorneys at Dvorak Law Group are closely monitoring the legal status of the non-compete ban and are available to discuss, advise, and assist with any issues regarding non-compete clauses or other restrictive covenants.