In April 2024, Ryan LLC, a Texas-based tax services and software company, filed a lawsuit against the Federal Trade Commission (FTC) in the U.S. District Court for the Northern District of Texas. The lawsuit challenged the FTC’s new Non-Compete Rule, which aimed to ban nearly all non-compete clauses in the country. Ryan LLC, along with several business associations, claimed the Ryan v FTC overstepped its legal authority by introducing such a sweeping rule.

They argued that the Ryan v FTC acted without specific Congressional approval and warned the rule could disrupt how companies protect trade secrets and maintain workforce stability. Businesses often use non-compete agreements to prevent employees from jumping to competitors with insider knowledge. Ryan LLC maintained that the FTC had no power to create regulations that directly impact employment contracts.

This lawsuit quickly caught national attention. Legal professionals, employers, and HR experts watched closely, knowing the outcome could affect millions of workers and companies. The real issue wasn’t just about one regulation—it was about how far a federal agency could go in reshaping employment law.

The FTC’s Non-Compete Rule: An Overview

In January 2024, the Ryan v FTC introduced its proposed Non-Compete Clause Rule. The rule intended to prohibit nearly every form of non-compete agreement between employers and workers. The FTC argued that such clauses restrict job mobility, lower wages, and discourage innovation. Under the proposed rule, employers would also need to rescind existing non-competes and inform affected employees.

The Commission claimed authority under Section 5 of the FTC Act, which allows it to prohibit unfair methods of competition. The agency cited research showing about 30 million U.S. workers were bound by non-competes, stating that eliminating these agreements could raise wages and boost entrepreneurship.

However, employers across the country pushed back. They claimed non-competes serve legitimate purposes like protecting trade secrets, securing client relationships, and safeguarding training investments. The rule was set to take effect on September 4, 2024, but lawsuits—including one from Ryan LLC—emerged to challenge it before implementation.

Ryan LLC argued that the rule was too broad and disruptive and said it wasn’t based on Congressional legislation. They also pointed out that employment contract laws traditionally fall under state jurisdiction, not federal.

 

Legal Arguments Presented by Ryan LLC

Ryan LLC focused its legal arguments on two major points: the Ryan v FTC lacked the authority to enforce such a rule, and the rule violated the Administrative Procedure Act (APA). Ryan LLC

FTC Appeals Texas Federal Court’s Decision Halting Its Noncompete Ban Nationally

doesn’t grant the agency the power to create substantive rules regarding unfair competition.

Historically, the Ryan v FTC enforced competition law through individual cases, not through sweeping rules that affect the entire country. Ryan LLC argued the agency tried to take on a role reserved for Congress. The company said the rule not only exceeded legal limits but also bypassed the legislative process entirely.

Ryan LLC also challenged the rule under the APA. They claimed the Ryan v FTC didn’t offer enough evidence to justify a nationwide ban on non-competes. The company criticized the rule’s one-size-fits-all approach, which failed to consider differences across industries, roles, and regions.

The lawsuit also raised concerns about economic impact. Ryan LLC argued that small businesses would face higher risks, as they rely on non-competes to protect key staff and prevent talent poaching. The company warned that removing non-competes could hurt competition by making it easier for bigger companies to hire away trained employees from smaller firms.

Through this case, Ryan LLC sought not only to stop the rule but also to set a precedent about the limits of federal agencies. The company asked the court to confirm that only Congress can create laws with broad, national effects on private employment.

 

District Court’s Decision and Rationale

In August 2024, the U.S. District Court for the Northern District of Texas ruled in favor of Ryan LLC. The judge stated that the FTC went beyond its legal boundaries by trying to enforce a rule that Congress never authorized.

The court ruled that the FTC Act doesn’t give the agency the power to make regulations like the Non-Compete Rule. It clarified that while the FTC can enforce existing laws, it can’t act as a lawmaker. The court emphasized that only Congress holds the constitutional power to pass laws that impact private businesses on a national scale.

The judge also called the rule “arbitrary and capricious,” meaning it lacked proper reasoning or evidence to justify such a sweeping change. The court criticized the FTC for failing to consider less drastic options or to weigh the economic consequences the rule might cause.

The court didn’t just block the rule—it sent a clear message about limits on regulatory authority. The decision reminded federal agencies that they must work within the law and respect the separation of powers. For now, employers could continue using non-competes, but the ruling opened a wider conversation about how far federal regulators should go.

 

Immediate Impact of the Ruling

The court’s decision immediately brought relief to many employers, who no longer had to prepare for a nationwide ban on non-compete agreements. It allowed businesses to continue including these clauses in employment contracts without fear of violating a federal rule.

Employers viewed the ruling as a win for protecting trade secrets, client relationships, and workforce stability. They argued that non-competes help retain talent and prevent competitors from gaining unfair advantages.

However, employee advocates criticized the ruling. They said it protected corporate interests while leaving workers vulnerable to contract restrictions that can limit job opportunities. Workers hoping for more flexibility and freedom in changing jobs saw the ruling as a setback.

The decision also signaled a broader shift in how courts evaluate agency power. Legal experts noted that the ruling fits into a trend of federal courts demanding stricter justification before agencies can enact sweeping policies. This case showed that courts want agencies to stay within clearly defined limits and follow the legal process.

Though non-competes remain in place for now, businesses and employees should expect further legal developments. The appeal process, as well as possible state-level reforms, could still change how non-competes work in the future.

 

FTC’s Response and Appeal

After the court struck down the rule, the FTC filed an appeal with the Fifth Circuit Court of Appeals in October 2024. In January 2025, the agency submitted its opening brief, defending its position and challenging the district court’s ruling.

The FTC argued that Section 5 of the FTC Act gives it authority to regulate unfair competition, including the use of non-competes. The agency insisted that non-competes harm workers by reducing job mobility and suppressing wages. The FTC maintained that its rule aimed to fix a widespread problem that affects millions of workers.

To counter claims of overreach, the FTC explained that it had considered narrower rules but chose a complete ban because it offered a simpler, more effective solution. The agency said the evidence supported a full prohibition, which it argued would help workers and promote competition.

Now, the Fifth Circuit will decide whether the FTC acted within its powers. Legal experts believe the outcome could reshape how agencies write rules in the future. If the court supports the FTC, the rule could go into effect, and other agencies might gain more confidence to create similar policies.

But if the court agrees with the lower court, it will mark another limit on federal regulators. Either way, the decision will have long-lasting effects for businesses, workers, and regulatory agencies.

 

Broader Implications for Employers and Employees

The Ryan v FTC case goes beyond one rule—it challenges how employment law is regulated and who gets to make those decisions. Employers see the court’s decision as a shield, protecting their ability to use non-competes to keep operations stable and protect proprietary information.

But employees now face a landscape where protections depend on their state’s laws. States like California already ban most non-competes, while others allow them under certain conditions. Without a federal rule, this patchwork of regulations makes it harder for workers to know their rights and for businesses to manage contracts across multiple states.

For employees, this means they must read employment contracts carefully and seek legal advice if they face restrictions. Many workers don’t understand how non-competes affect them until they try to leave a job and realize they’re limited in where they can work.

The case also pushes states to take action. Some may strengthen their protections for workers, especially if the federal government can’t. Businesses will need to monitor both state and federal developments and update their policies accordingly.

The legal uncertainty created by this case shows how critical it is for lawmakers and courts to define clear boundaries. Otherwise, both workers and employers will continue operating in a legal gray area.

Potential Outcomes and Future Considerations

As the appeal continues, there are a few possible outcomes. If the Fifth Circuit agrees with the district court, the FTC’s Non-Compete Rule stays blocked. This would limit the agency’s ability to pass broad regulations and reinforce the role of Congress in creating new employment laws.

If the appellate court sides with the FTC, the rule could go into effect, and companies would need to revise contracts, notify employees, and remove non-compete clauses. That shift would disrupt current practices and likely lead to more legal challenges.

There’s also a chance the court offers a middle-ground solution. It might rule that the FTC has authority but needs to revise the rule or provide more evidence. That would delay enforcement but keep the door open for a future version of the rule.

Congress could also get involved. Lawmakers might introduce legislation to regulate non-competes on a national level, creating clearer rules that survive legal scrutiny. That approach could bring more stability to both employers and workers.

No matter what happens, the Ryan case shows how quickly legal and regulatory standards can change. Employers and employees should stay informed and prepare for possible adjustments in contract law.

 

Final Thoughts on the Ryan v FTC Case

The Ryan LLC v. FTC case isn’t just about one employment rule—it’s about the bigger issue of who has the power to change business practices. By challenging the Non-Compete Rule, Ryan LLC opened a national debate about agency authority and workers’ rights.

So far, the courts have supported the argument that only Congress can make such major policy changes. This gives businesses temporary relief, but the fight isn’t over. The outcome of the appeal and possible state actions could still reshape employment law.

For now, non-competes remain valid, but the legal landscape keeps shifting. Employers must monitor changes, and workers should understand their contracts. Whether through courts, Congress, or state legislatures, more changes are likely on the horizon.

If you’re a business owner or employee trying to understand how this ruling affects you, Stevens Law Group is here to help. Our legal team stays on top of every development so you don’t have to. Contact Stevens Law Group today to review your employment agreements and prepare for what’s next.

Reference:

Ryan LLC v. Federal Trade Commission, No. 3:2024cv00986 – Document 211 (N.D. Tex. 2024)

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