Federal Trade Commission presses ‘pause button’ on noncompete cases

Rule background

In January 2023, the FTC proposed a rule generally prohibiting employers from imposing noncompete agreements on their workers. In the 15 months that followed, the federal agency received more than 26,000 comments on the proposed rule, with more than 25,000 of those comments supporting the proposed ban. On April 23, 2024, the FTC narrowly voted to approve a final rule banning nearly all noncompete agreements. Ferguson, then an FTC commissioner, voted against the rule.

The rule had been set to go into effect September 4, 2024, but a federal judge for the North District of Texas on August 20, 2024, stopped the rule from taking effect. In Ryan, LLC v. Federal Trade Commission, U.S. District Judge Ada Brown said the FTC, which enforces federal antitrust laws, does not have the authority to ban practices it deems unfair methods of competition by adopting broad rules.

The motions filed on March 7 would pause cases which appeal that decision.

What the FTC rule said

Under the rule in question, employers would have been required to provide notice to current and former workers (other than senior executives) who were bound by an existing noncompete agreement that they would not be enforcing any noncompetes against them.

Key to remember: The Federal Trade Commission has asked federal courts to pause cases questioning its rule banning almost all noncompete agreements for 120 days during which the agency will reevaluate its support of the rule.