On July 23, 2024, the US District Court for the Eastern District of Pennsylvania rejected an employer’s legal challenge of the Federal Trade Commission’s final rule banning non-compete agreements and found that the company failed to show it would suffer irreparable harm if the final rule stood. 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 4th.
The Eastern District of Pennsylvania’s decision diverges from other recent legal challenges to the FTC’s non-compete ban. On July 3rd, a federal judge for the Northern District of Texas granted a limited preliminary injunction staying the final rule’s September 4th effective date. However, the Northern District of Texas limited its preliminary injunction only to the parties in that case.
This judicial split keeps employers waiting to see if the final rule will take effect on September 4th. The employer is expected to appeal the Eastern District of Pennsylvania’s decision, and the Northern District of Texas has announced it will issue a further decision on the merits of the final rule on or before August 30, 2024. These challenges keep the door open for broader injunctive relief to be granted for employers nationwide before the final rule takes effect. 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 4th. If you have any questions regarding the Rule 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.
