DALLAS, TEXAS - The future of a Federal Trade Commission’s ban on noncompete agreements is in serious peril after a preliminary ruling from a Texas federal court last week.

Judge Ada Brown of the U.S. District Court for the Northern District of Texas issued a preliminary order against the FTC ban in a lawsuit brought by Ryan LLC, a Dallas-based tax services firm. The firm uses noncompete agreements to keep competitors from hiring away its workers and to keep workers from poaching firm clients. Ryan argued the FTC overstepped its legal authority to ban noncompete agreements. Judge Brown permitted the U.S. Chamber of Commerce to intervene in the lawsuit to assert similar arguments.

Judge Brown agreed the FTC lacks authority to make the sweeping rule and said the plaintiffs are likely to succeed on the merits of the case.

As it stands now, Brown’s injunction has a limited scope: It only bars the FTC from enforcing the ban against the plaintiffs, including Ryan LLC as well as the U.S. Chamber of Commerce, the Business Roundtable and other business groups. It does not extend to member companies of those groups.

Judge Brown said she intends to issue a final ruling on the merits of the case by August 30, 2024 – prior to the the FTC ban’s September 4, 2024 effective date. It is anticipated the plaintiffs will urge Judge Brown to issue a nationwide injunction against the enforcement of the FTC’s ban.

Read Judge Brown’s ruling here: Ryan LLC v. Federal Trade Commission, N.D.Tex. No. 3:2024cv00986 (Jul. 3, 2024)