Since the Federal Trade Commission (FTC) issued its final rule banning noncompete agreements on April 23, it’s been a long summer for employers playing the frenzied “what if” game.
What if the FTC rule stands? What if it is enjoined? What if it is upheld in part and enjoined in part? What if different courts rule differently?
Then there’s the corollary questions: “What do we do while waiting? What stance do we take with existing employees under noncompetes? What about the employees we are recruiting? What about former employees still under restrictions?”
On August 20, those guessing games abruptly stopped when the U.S. District Court for the Northern District of Texas issued its eagerly awaited ruling in Ryan LLC v. FTC, enjoining the final rule from going into effect on September 4. Critically, the court enjoined the final rule nationwide. The court concluded that the FTC exceeded its authority and that the rule itself was arbitrary and capricious. In particular, the court chastised the FTC for not considering less disruptive alternatives or exceptions before issuing a blanket, one-size-fits-all ban. While the FTC may still appeal that decision, most employers heaved a sigh of relief that everything would be as it previously was, as though the final rule was never issued.
In practical terms, the injunction reverts the playing field to the status quo before April 23. Employers need not issue notices to current and former employees subject to noncompetes alerting them that...
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