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U.S. District Judge Ada Brown of the Northern District of Texas set aside the FTC’s ban on non-competes and held that it shall not be enforced or otherwise take effect nationwide as to all employers, not simply the parties.
Global tax services giant, Ryan LLC, filed suit within hours of the FTC announcing a Rule banning non-competes which was to take effect September 4, 2024 in Ryan LLC, et al., v. Federal Trade Commission.
It is Ryan’s story, so I will let them tell it:
- “Today we prevail in protecting the very foundation of innovation that drives our economy from the overreach of the FTC in its misguided mission to invalidate millions of employment contracts,” said Ryan Chairman and CEO G. Brint Ryan. “Non-competes serve as a cornerstone of mutual trust between employer and employee. As a champion for our clients and business owners nationwide, Ryan stands proud in the role we’ve played to protect businesses’ intellectual property and ongoing investment in employee training and skill development.”
- Ryan’s lawsuit, filed within the hour after the FTC promulgated its ban on non-competes, challenged the FTC’s authority to issue such a rule, which imposes an extraordinary burden on business owners seeking to protect their IP and to retain talent within the professional services industry. The U.S. Chamber of Commerce, Business Round Table, Texas Association of Business, and Longview Chamber of Commerce joined the case shortly after it was filed, along with a vast array of organizations that filed briefs supporting Ryan’s position.
- In her ruling, Judge Brown concluded that “the text and the structure of the FTC Act reveal the FTC lacks substantive rulemaking authority with respect to unfair methods of competition” and that “the Rule is arbitrary and capricious because it is unreasonably overbroad without a reasonable explanation.” She emphasized “the role of an administrative agency is to do as told by Congress, not to do what the agency think[s] it should do.”
- “Judge Brown’s ruling preserves the economic freedom of businesses and their employees to enter into non-compete agreements,” said John Smith, Ryan Chief Legal Officer and General Counsel. “They play a vital role in safeguarding intellectual property and innovation, building trust within businesses, and investing in training their people.”
Judge Brown rejected the FTC’s argument that the court ruling should only apply to the parties, holding that the ban applies nationwide to all employers. Meaning, employers can ignore the FTC rule (for now).
(You can cut and paste their press release address at https://ryan.com/about-ryan/press-room/2024/ryan-lawsuit-succeeds-in-striking-down-ftc-ban-on-non-compete-agreements/).
Martin Merritt, J.D., Ole Miss Law ’86. Martin tried over 500 healthcare law cases to jury verdict, judgment or ALJ administrative law decision. He has been selected to the 2024 D Magazine “Best Lawyers in Dallas” List, Texas Monthly’s “Texas Super Lawyers” and U.S. News and World Reports “Best Lawyers in America,” is Past President of the Texas Health Lawyers Association, Past Chair of the Dallas Bar Health Law Section and State Bar of Texas award-winning author, has published books from the ABA, and published hundreds of articles on matters related to health law and legal ethics in the Federal Lawyer, the Texas Bar Journal and many trade publications. If you have a question or need to make a referral, Martin can be contacted at his office in Dallas, Texas. Email at Martin@MartinMerritt.com