On April 23, 2024, the FTC finalized a rule prohibiting most non-compete clauses in employer-employee contracts. The rule was published on May 7, 2024, and was scheduled to take effect September 4, 2024. However, prior to the effective date, on August 20, 2024, in Ryan LLC v. Federal Trade Commission the U.S. District Court for the Northern District of Texas held that the FTC exceeded its statutory authority and that the rule was arbitrary and capricious. The court permanently enjoined the FTC from enforcing the rule, and rejected the FTC’s argument that relief should be limited only to the named plaintiffs. The FTC appealed the decision to the U.S. Court of Appeals for the Fifth Circuit on October 18, 2024. Both parties have filed their opening appellate briefs, and oral arguments will take place following the FTC’s Reply Brief due February 24, 2025.
Given the FTC is permanently enjoined from enforcing the rule, unless the FTC successfully appeals, non-competes are legal and enforceable on the same terms as they were before the FTC passed the non-compete rule. The appellate process in Ryan LLC should continue to be monitored for potential changes.
Mallon Lonnquist Morris & Watrous, PLLC is a business, transactional, real estate, and litigation law firm in Denver, Colorado. The attorneys at MLMW regularly represent businesses and individuals in business and contract disputes and related litigation including corporate, employment, partnership, construction, and service agreement disputes.
