A Texas federal court in Ryan LLC v. FTC issued an opinion and order on August 20 setting aside the FTC Noncompete Ban (the “FTC Rule”) on a nationwide basis. Specifically, the Court found the FTC Rule to be “arbitrary and capricious” and the agency’s action in promulgating the FTC Rule to be in excess of its statutory authority. Accordingly, the FTC Rule will not go into effect on September 4.
Though employers may breathe a momentary sigh of relief, the issue will likely not die here. Because federal courts in Florida and Pennsylvania are also considering the validity of the FTC Rule, appeals of the Texas decision and those in the other districts courts are probable, potentially resulting in eventual appeals to the Supreme Court of the United States. Moreover, even where allowed under state law, noncompete agreements (and post-employment restrictive covenants, in general) continue to be disfavored and heavily scrutinized by courts. And, as discussed in a previous alert, Virginia already has a low-wage worker noncompete ban. Regardless of the FTC Rule’s fate, both courts and state legislatures will likely continue to chip away at noncompetes. Employers are best served focusing on protecting core legitimate business interests and narrowly drafting restrictive covenants with the assistance of counsel versed in this area.
K&C’s Labor & Employment Team will continue to monitor the situation.
The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2026.
