On April 24, 2024, Winstead’s Labor & Employment team reported that—after much anticipation— the FTC issued its final rule banning noncompete agreements nationwide. In our initial post, we noted that the final rule had yet to be published in the Federal Register but that its publication triggers the 120-day period before the rule becomes effective. The final rule was published in the Federal Register on May 8, 2024, and the FTC notes that its expected effective date is therefore September 4, 2024.

The Federal Register is the official journal of the federal government that contains, among other things, government agency rules interpreting federal statutes. For example, the FTC’s noncompete rule interprets Section 5 of the FTC Act, 15 U.S.C. § 45(a)(1), which declares “unfair methods of competition in or affecting commerce” to be unlawful. In short, the rule’s publication to the Federal Register means it is being processed for codification of the U.S. Code of Federal Regulations, officially rendering the rule a federal regulation to be interpreted and utilized by courts across the country.

As we noted previously, the rule’s effective date is employers’ deadline to comply with the rule’s notice requirement. Specifically, employers must give written, individualized notice to employees that their existing noncompete cannot be legally enforced against the worker. The final rule includes model language to assist employers in sending compliant notices to applicable workers, which can be delivered to workers via hand delivery, regular mail, email, and even text messages.

However, employers should continue to monitor ongoing litigation filed against the FTC’s rule. At least two federal lawsuits were filed in Texas since the FTC issued the final rule. These lawsuits include the lawsuit promised by the U.S. Chamber of Commerce and a lawsuit brought by Ryan, LLC, a Dallas-based tax services provider. The Chamber of Commerce’s lawsuit was shut down by the FTC under the “first to file” doctrine in favor of the Ryan, LLC proceedings.

Judge Ada Brown in the U.S. District Court for the Northern District of Texas set a briefing schedule on Ryan, LLC’s motion to stay enforcement of the FTC’s noncompete ban. Pursuant to Judge Brown’s briefing schedule, she will issue a decision on whether the rule is stayed or effective on July 3, 2024. Therefore, hopefully, by July 3, employers will know if compliance with the FTC’s notification rules will be required.

Winstead’s Labor & Employment team will keep a close eye on the progress of Ryan, LLC v. FTC and other litigation related to the FTC’s final rule. We will provide updates on the outcome of Ryan LLC’s motion to stay the noncompete ban and any compliance requirements for employers.