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. Two such cases, discussed below, have differed in denying the preliminary injunction and granting the preliminary injunction with regard to the subject plaintiffs in such case only.
On July 23, 2024, the United States District Court for the Eastern District of Pennsylvania denied plaintiff’s motion for preliminary injunction in ATS Tree Services, LLC v. Federal Trade Commission, et al. (2:24-cv-1743). The Court found that plaintiff failed to show irreparable harm or that it was likely to succeed on the merits of their challenge to the FTC’s Non-Compete Rule.
Alternatively, as previously noted in our labor and employment blog, the United States District Court for the Northern District of Texas granted a motion for preliminary injunction for the subject plaintiffs in the Ryan LLC case. In the coming weeks, the parties in the Ryan LLC 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.
A third case seeking preliminary injunction is pending in United States District Court for the Middle District of Florida, entitled Properties of the Villages, Inc. v. Federal Trade Commission (5:24-cv-000316). A hearing is scheduled on plaintiff’s motion for preliminary injunction on August 14, 2024.
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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 not be 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.
