Federal Court Issues Limited Injunctive Relief Against FTC Non-Compete Rule

On July 3, 2024, the U.S. District Court for the Northern District of Texas granted a limited preliminary injunction staying the effective date of the Federal Trade Commission’s final rule banning non-compete agreements. The court’s ruling is limited only to parties in that case, however, as the court declined to issue a nationwide injunction. The FTC’s controversial final rule, which will effectively nullify most existing non-compete agreements and limit enforcement to certain senior executives only, is currently scheduled to go into effect on September 4.

The court also announced it will issue a further decision on the merits of the case on or before August 30, 2024, so it remains possible that broader injunctive relief may be granted for employers nationwide prior to the effective date of the FTC final rule. Additional litigation challenging the FTC’s final rule is also pending in the Eastern District of Pennsylvania and offers another opportunity for broader injunctive relief to be issued to employers before the final rule takes effect on September 4.

While these challenges remain ongoing, employers are encouraged to continue to plan and prepare for the final rule to potentially go into effect on September 4. If you have any questions regarding the Rule and/or would like to discuss your company’s existing non-compete and non-solicitation agreements, including the notice requirement, please contact any member of our Labor and Employment Law team.

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