On May 7, 2024, the Federal Trade Commission (“FTC”) published the final rule banning most non-compete agreements in the Federal Register (the “Non-Compete Clause Rule”). It was scheduled to take effect 120-days after publication on September 4, 2024, unless it was stayed by a federal court, and it would have preempted less restrictive state laws by making it unlawful for employers to enter into, enforce, or attempt to enforce non-compete restrictive covenants with most employees and independent contractors, with some exceptions, as violating Section 5 of the FTC Act as an unfair method of competition. On July 3, 2024, the Federal District Court of the Northern District of Texas temporarily enjoined the September 4 effective date of the Non-Compete Clause Rule as to the named plaintiffs in Ryan LLC, et al. Trade Commission, Case 3:24-cv-00986-E. And now on August 20, 2024, in that case, the same judge permanently enjoined the enforcement of the Non-Compete Clause Rule nationwide on its effective date of September 4, 2024, and thereafter.
The court reasoned that the FTC’s claimed statutory authority in promulgating the Non-Compete Clause Rue, specifically Section 6(g) of the FTC Act, does not authorize substantive rulemaking. Therefore, Section 6(g) requires individuals who seek redress from non-compete agreements to seek case-by-case adjudication before the FTC. Further, the court found that Section 18 of the FTC Act that authorizes substantive rulemaking vests the FTC with the power to promulgate substantive rules regarding only unfair or deceptive acts or practices, including requirements for the purposes of preventing such acts or practices, not unfair methods of competition. This interpretation may invite the FTC to appeal the court’s decision to the 5th Circuit.
If you are a company or individual with questions regarding either the Non-Compete Clause Rule or the enforceability of non-compete agreements under Missouri law, you may not want to act alone and wish to consult with one of the experienced attorneys at Cosgrove Law Group, LLC. Call us at 314-563-2490.