Judge Ada E. Brown of the U.S. District Court for the Northern District of Texas recently issued a preliminary injunction preventing enforcement of the Federal Trade Commission’s (FTC) proposed final rule (Final Rule) banning most noncompete agreements in the United States. However, the court’s order is relatively limited as it prevents the FTC from enforcing it only against the plaintiffs (Ryan, LLC) before the Court. For other employers, the Final Rule will still take effect on September 4, 2024, unless halted by pending legal challenges.

HCAOA submitted an amicus brief in support of Ryan, LLC’s Motion to Stay the FTC’s ban, which was granted. You can read our amicus brief here. The court’s decision to grant the motion underscores its agreement with arguments asserting that the FTC’s Final Rule exceeds its statutory authority under the FTC Act and was arbitrary and capricious under the Administrative Procedures Act.

Key points from the court’s ruling include its finding that the FTC lacks the authority under Section 6(g) of the FTC Act to issue substantive rules, as opposed to merely procedural ones. The court also found a substantial likelihood that the Final Rule would be considered unlawful, pointing to its “one-size-fits-all approach with no end date,” the FTC’s reliance on state-specific studies as justification for a nationwide ban, and the FTC’s failure to consider less disruptive alternatives.

It appears likely that the nationwide ban on noncompete agreements may face significant legal hurdles in the coming months.