There has been a lot of activity in Ryan, LLC v. FTC since the court issued its preliminary injunction staying the noncompete rule as to the plaintiffs, but not much has actually happened.
In short, plaintiffs moved to expand the scope of relief in the court’s preliminary injunction, which the court denied. And the court set a briefing schedule for summary judgment.
Each is detailed below, as are some suggestions for companies and workers to consider now.
Plaintiffs’ motion for reconsideration
The plaintiffs moved for reconsideration of the limitations on the scope of relief afforded by the preliminary injunction. The plaintiffs make the following basic points:
The result of [limiting the remedy to only the named plaintiffs] is that virtually all businesses affected by the Noncompete Rule— including plaintiff-intervenors’ members—must continue to incur substantial costs preparing to comply with an unlawful regulation. And without preliminary relief, many of those businesses may feel compelled to intervene in this suit to protect their interests.
. . . First, the Fifth Circuit has recognized that an order preliminarily enjoining an unlawful regulation or staying its effective date under the Administrative Procedure Act need not be “party-restricted.” Career Colleges & Schs. of Texas v. United States Dep’t of Educ., 98 F.4th 220, 256 (5th Cir. 2024). Rather, the scope of preliminary relief “aligns with the scope of ultimate relief under Section 706, which is not party-restricted and allows a court to ‘set aside’ an unlawful agency action.” Id. . . .
Second, . . . in suits brought by associations on behalf of their members, any remedy granted should “inure to the benefit of those members of the association actually injured.” Warth v. Seldin, 422 U.S. 490, 511, 515 (1975). . . . That irreparable injury includes the immediate costs of complying with the Commission’s unlawful regulation.
In response, again ignoring the real-world implications of its positions, the FTC argued:
In light of the Court’s intention to enter a disposition of this action on the merits before the Non-Compete Rule takes effect, . . . [t]he question of the proper scope of any preliminary injunctive relief will become moot when the Court enters final judgment on the merits of Plaintiff and Plaintiff-Intervenors’ claims . . . . And that decision is expected before the Non-Compete Rule takes effect, i.e., before anyone—regardless of the scope of preliminary injunctive relief—is required to comply with it. The issues raised in Plaintiff and Plaintiff-Intervenors’ reconsideration motion are thus merely academic.
The reality is, as I pointed out previously, that companies are now in a complete state of limbo and will have very limited time to comply with the rule if the court’s final order remains as narrow as the preliminary injunction. And of course, imagine the chaos that will ensue if the Ryan court’s final decision is narrow, but a later order invalidates the rule broadly. Absent a broad order before the rule takes effect, companies around the country will need to send notices invalidating their noncompetes — to (according to the FTC) some 30 million employees (I believe that number is grossly exaggerated) — only to later try to “undo” those notices. Can the notices be undone? Will employees who started a job in violation of an “unenforceable” noncompete be required to quit the job if the rule turns out to be invalid?
This scenario is not, as the FTC apparently views it, “merely academic.” What is merely academic are the papers that the FTC relies upon, which consider the impacts of noncompetes in theory, not as experienced every day by companies, workers, and the lawyers representing clients with — and without — noncompetes.
The FTC makes the following additional point:
Plaintiff and Plaintiff-Intervenors contend that, without expedited consideration of their reconsideration motion, parties not currently before the Court will “incur substantial costs preparing to comply” with the Non-Compete Rule. . . . But the Court intends to decide the parties’ cross-motions for summary judgment five days before the Rule takes effect. Thus, all parties, including those properly before the Court who have obtained preliminary injunctive relief, must prepare to comply with the Rule in the event that the Court grants Defendant’s motion for summary judgment.
The callousness of the FTC’s apparent disregard of the impact of the rule on companies — and their employees — around the country is astonishing.
The FTC should, on its own volition, stay operation of the rule to provide the necessary time for a final and orderly resolution in the courts, and for companies to adjust and comply with any eventual ruling.
The summary judgment briefing schedule
As for the briefing schedule, the parties each submitted their recommendations, the court issued an order, and then the parties agreed to request modification of the schedule, which the court allowed. The result of all of these machinations is that the schedule for summary judgment is as follows:
- July 19, 2024: Plaintiffs to file their motions for summary judgment
- August 2, 2024: FTC to file its opposition and cross-motion for summary judgment
- August 9, 2024: Plaintiffs to file their opposition to the FTC’s summary judgment motion and reply in support of their motion for summary judgment
- August 16, 2024: FTC to file its reply in support of its summary judgment motion
The court also reiterated that it plans to issue its final decision on August 30, 2024.
Mark your calendars!
Steps for companies and workers to consider now
The plaintiffs’ motion all but invites companies to intervene. I suspect, given the timing, that the court would be disinclined to allow many, if any, interveners at this point. Regardless, the court presumably would not want to turn the case into a circus, with dozens, hundreds, or thousands of companies intervening. So I don’t think intervention is a viable option — at least not for many companies.
That brings me back to my suggestions that companies consider whether to join the U.S. Chamber of Commerce (or one of the other associations in the case) or a large number of companies independently sue the FTC en masse to invalidate the rule.
Obviously, companies should also continue to take the steps that I (and many other lawyers around the country) have been advocating for some time. See FTC bans noncompetes: How will you protect your company’s information and keep your customers?
And for workers, if you are making a job change soon, watch this: The Exit Plan: Being a Good Leaver. If you recently started a job or are about to start a job, watch this: Avoiding Mistakes When Starting a New Job.
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*Hat tip (as John Marsh would say) to Dawn Mertineit and Dan Levy for seeing the motion and order before I did!