On August 20, 2024, a federal judge in Texas ruled that the Federal Trade Commission (FTC) exceeded its authority when it adopted a regulation essentially banning non-competition agreements in the United States.

Importantly, Judge Ada Brown ruled that her decision is effective immediately and nationwide. Until and unless the FTC succeeds in convincing the Fifth Circuit Court of Appeals to reverse the decision, employers will not be required to forego the use of non-competition agreements, nor will they be required to send notices to current and former employees and contractors with whom they have active agreements stating that they are no longer enforceable. The case is Ryan LLC v. Federal Trade Commission. 

This decision is a major win for employers. It does not, however, have any impact on state laws that regulate restrictive covenants. State legislatures continue to adopt varying limitations, and employers must use non-competition agreements with care.