FTC Bans Employee Noncompete Agreements; Challenges Underway

On April 23, 2024, the U.S. Federal Trade Commission (FTC) voted 3-2 to ban the use of nearly all noncompete agreements in America's for-profit businesses (with only a few narrow exceptions). The party-line vote comes after 26,000 public comments flooded the FTC in response to its January 2023 Proposed Rule to ban noncompete agreements. The Final Rule is set to go into effect 120 days following publication in the Federal Register, but a series of major challenges to the Rule—and to the FTC's authority to make and enforce the Rule—are expected, with some already underway. Dallas-based tax services and software provider Ryan LLC filed the first lawsuit against the FTC's Final Rule within hours of the vote. The U.S. Chamber of Commerce filed suit this morning, requesting declaratory judgment and for the Final Rule to be permanently enjoined.