As we discussed in an earlier post, the Federal Trade Commission (“FTC”) issued a final rule prohibiting post-employment non-compete clauses for workers in the United States. FTC’s final rule takes effect on September 4, 2024. However, the rule is currently being litigated in several jurisdictions, including applications for preliminary injunction to prevent it from going into effect.
One such case is Ryan LLC v. Federal Trade Commission (3:24-cv-986), filed in the United States District Court for the Northern District of Texas. On July 3, Judge Ada Brown issued an order granting a preliminary injunction for the plaintiffs following a determination that they are substantially likely to prevail on the merits of their challenge to the FTC’s Non-Compete Rule. Judge Brown’s opinion cited to a recent U.S. Supreme Court decision (Loper Bright Enterprises v. Raimondo), in which the Supreme Court overturned a longstanding precedent, known as the Chevron doctrine, where judicial courts deferred to an administrative agency’s interpretation of ambiguous laws which the agency was charged with enforcing.
In the coming weeks, the parties in the Ryan case will fully brief a motion for summary judgment and Judge Brown has stated her intent to decide on the merits of the case by August 30, 2024.
Furthermore, another challenge to the FTC’s non-compete rule is pending in the United States District Court for the Eastern District of Pennsylvania, ATS Tree Services, LLC v. Federal Trade Commission, et al. (2:24-cv-1743). A decision in the ATS case may be issued in the next few weeks.
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Despite pending litigation, in the next few weeks, employers and business entities should proactively review their policies, procedures and agreements for any non-compete clauses and determine which employees will need to be notified by September 4, 2024 that their non-compete are no longer binding, should the FTC’s rule is not enjoined or ruled unconstitutional. Additionally, those policies and agreements containing non-compete clauses will need to be revised to ensure compliance with the FTC’s final rule.
We will provide updates as matters develop with respect to FTC’s final rule and its pending litigation.
For further information or guidance on revising your policies, procedures, and agreements, please contact David Paseltiner, Robert Londin or Rose Egan.
