FTC Non-Compete Ban Timeline

Federal Trade Commission Building in Washington, DC.

What's the latest on the legal challenges to the FTC's ban on non-compete agreements?

Here is a timeline of the decisions and events leading up to the final rule and the legal challenges since:

  • January 5, 2023 – The Federal Trade Commission (FTC) proposed a rule that would ban non-compete agreements nationwide.
  • April 19, 2023 – The proposed rule was open for public commentary through April 19 and received an overwhelming response – close to 30,000 comments. In the following months, the FTC “carefully review[ed] each comment and ma[de] changes to the proposed rule in response to the public’s feedback.”
  • April 16, 2024 – FTC Chair Lina Khan announced that a special Open Commission Meeting would be held virtually the following Tuesday to vote on the proposed final rule.
  • April 23, 2024 – The FTC voted 3-2 to publish the “Non-Compete Clause Rule” to ban employers from entering into non-compete clauses with workers on or after the effective date. Before the FTC can enforce the rule, it must publish the final version in the Federal Register, which contains all government agencies' rules and regulations.
  • April 23, 2024 – Within hours of the FTC vote, global tax services firm Ryan filed a lawsuit (Ryan LLC v. FTC, No. 24-cv-00986-E) in the Northern District of Texas (a U.S. district court) seeking to “prevent the immense, undue burdens the FTC’s rule would impose on service-driven companies of every size nationwide.”
  • April 24, 2024 – One day later, the U.S. Chamber of Commerce filed a similar complaint against the FTC in the Eastern District of Texas (Chamber of Commerce et al. v. FTC, No. 24-cv-00148), requesting an injunction to stop the agency from enforcing the non-compete rule.
  • April 25, 2024 – A third lawsuit (ATS Tree Services LLC v. FTC, No. 24-cv-01743) was filed in the Eastern District of Pennsylvania (also a U.S. district court) by ATS Tree Services, LLC, a Pennsylvania company with 12 employees. The court is expected to issue a decision on the plaintiff’s request for a preliminary injunction by July 23.
  • May 7, 2024 – The FTC published the final rule in the Federal Register. Per the federal rulemaking process, executive branch agencies must publish the final rule in the Federal Register before the rule is enforceable. The FTC’s non-compete clause rule is set to go into effect 120 days after this date, unless the courts intervene.
  • May 9, 2024 – the U.S. Chamber of Commerce joined its lawsuit with Ryan's since both suits sought the same relief, i.e., to set aside the FTC rule banning non-compete agreements.
  • May 10, 2024 – The now-united plaintiffs filed a motion on May 10 for a preliminary injunction to stop enforcement of the rule.
  • May 29, 2024 – The FTC filed its response, opposing the injunction, on May 29.
  • July 3, 2024 – U.S. District Judge Ada Brown in Dallas, the federal judge assigned to the Ryan LLC v. FTC case, granted a preliminary injunction blocking the FTC from enforcing its ban against the plaintiffs in the lawsuit pending the outcome of their consolidated lawsuits. In her ruling, Judge Brown wrote that the plaintiffs are likely to succeed on the merits of the case.
  • August 30, 2024 – Judge Brown said she will issue a final ruling on the lawsuit by August 30, a few days before the FTC rule is set to take effect.
  • September 4, 2024 – The final rule to ban non-compete agreements is scheduled to become effective on September 4, 120 days after its publication in the Federal Register, unless legal challenges prevent the ban from taking effect.

The leading lawsuit in this issue, Ryan LLC v. FTC, is expected to be resolved prior to the effective date of the FTC ban (September 4, 2024). However, if the court's decision is appealed, it could take many more months before the issue is resolved.

In the meantime, Texas employers may want to revisit their existing trade secret protections.

Consider these alternatives to non-compete agreements: Life After The FTC Ban: Alternatives To Non-Competes

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