A federal judge has blocked the Federal Trade Commission’s (FTC) noncompete rule, which was set to take effect on September 4, 2024. The U.S. District Court for the Northern District of Texas ruled on August 20, 2024, in Ryan, LLC v. FTC, that the rule is unlawful. The court’s decision not only prevents enforcement of the rule against any company nationwide but also concludes that the FTC lacks substantive rulemaking authority over unfair methods of competition. 

This ruling followed an earlier preliminary injunction that applied specifically to the Plaintiff-Intervenors. Now, the court’s judgment effectively halts the FTC from implementing the noncompete ban across the board. However, it is important to note that this decision does not affect state law bans on noncompete agreements, such as California’s, which remain in place regardless of federal rulings. 

The FTC may still appeal this decision, but any appeal would likely face an uphill battle in the U.S. Court of Appeals for the Fifth Circuit and potentially the U.S. Supreme Court, both of which have issued decisions in recent years limiting federal agencies’ regulatory powers. 

As a result of the court’s ruling, employers can hold off on compliance measures related to the FTC’s noncompete rule, though it is important to stay updated on the appellate process in the Ryan case.