U.S. Chamber joins Ryan, LLC challenge to FTC noncompete ban

As you will recall, the court in the U.S. Chamber of Commerce’s case challenging the FTC’s noncompete ban stayed that case to let the first-filed case, Ryan LLC v. FTC, proceed.

Shortly afterward, on May 7, the court in the Ryan case issued a briefing schedule, stating that its decision would be issued on July 3.

Given that ruling, on May 8, the U.S. Chamber of Commerce and the other plaintiffs in that case (Business Roundtable, Texas Association of Business, Longview Chamber of Commerce) filed an unopposed motion to intervene in the Ryan case.

Yesterday (May 9), the court issued an order granting that motion and setting an updated briefing schedule. The court’s order assumes (based on the motion to intervene) that the U.S. Chamber will promptly file a motion to stay the FTC’s noncompete ban and for a preliminary injunction.

The court also allowed the FTC to file a longer brief, given the additional papers that will be filed collectively by the plaintiffs.

The new briefing schedule is as follows:

  • May 29, 2024: FTC’s deadline to file a consolidated opposition to the motions for a stay and preliminary injunction, with a 4,250 word limit. (This is one week later than previously scheduled.)
  • June 12, 2024: Deadline for Ryan, the U.S. Chamber, and the other plaintiffs to file a reply. (This is one week later than previously scheduled.)
  • June 13, 2024: Court to let parties know if a hearing is warranted. (This is one week later than previously scheduled.)
  • June 17, 2024: Hearing — if one is needed. (This date did not change.)
  • July 3, 2024: Court to issue a decision on the merits of the motion. (This was from the original order, and was not expressly addressed by this order.)

So, it seems as though we will get lots more briefing, but will still know the fate of the FTC’s noncompete rule by July 3.

Stay tuned!

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Steps to take now

Want more background on the FTC’s noncompete rule and steps to take now? Take a look at FTC bans noncompetes: How will you protect your company’s information and keep your customers?

Key at this point is to be thinking about the following:

  • Reviewing and updating agreements and policies to ensure compliance with all of the new state-law developments. This includes, in particular, noncompetes, broad confidentiality agreements, and other agreements in the crosshairs (including no-recruit agreements, nonsolicitation agreements, anti-moonlighting provisions, and training repayment agreements), as well as internal policies that my be treated like impermissible restrictions on employee competition.
  • Reviewing and updating procedures (including the use of data loss prevention software) for protecting trade secrets, other confidential information, and goodwill (see trade secret protection program primer and checklist).
  • Using supplemental agreements and approaches to mitigate the impact of the tightening restrictive covenant laws. For example:
    • Notice provisions (“true” garden leave clauses) may, to the extent enforceable, offer meaningful protection for a short term. Even the FTC’s new Rule acknowledges that these agreements fall outside the scope of the Rule.
    • Springing noncompetes (a court-ordered noncompete as a remedy for a violation of other restrictive covenants or obligations) may create both a deterrence effect and provide a partial remedy for wrongdoing that is discovered early enough. This is a tool created years ago for a client who did not want to use a noncompete, but was worried about the impact of employees violating the other restrictive covenants. It has since been incorporated into Massachusetts noncompete law (MNAA, G.L. c. 149, § 24L(c)).
  • Emphasizing training. Never lose sight of one of the easies and most effective tools you have is to educate and train employees, especially at onboarding and off-boarding, and with special attention to employees working remotely.

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*Thank you to Lea Dearing and Erika Hahn for alerting me to the new orders.