Last week, a Pennsylvania Federal Judge refused to issue a temporary restraining order to block the Federal Trade Commission’s (FTC’s) ban on non-compete agreements. This was a very important ruling. All eyes are now on a Texas Federal Judge who has practically the same issue before her, and the Texas Federal Judge has allegedly indicated an inclination to stop the regulation.

In the Philadelphia case, the Federal Judge said she concluded that the FTC was properly exercising its rulemaking authority when it essentially banned non-compete agreements.

The Texas Federal Judge said she will issue a decision on the FTC rule by August 30, 2024, but when she issued a preliminary injunction it suggests that the non-compete ban will be struck down. Traditionally non-compete agreements were regulated by the states; however, the new FTC rule would affect non-compete agreements nationwide.

A third case is also pending in Florida Federal court. Appeals are likely in all the cases, regardless of their outcomes.  A split in the appellate courts could encourage the U.S. Supreme Court to take the appeals to finalize the interpretation of the new FTC rule.

The new FTC rule is set to take effect on September 4, 2024. The rule has a carveout for existing non-competes covering senior executives but these exceptions will be banned going forward.

Companies are paying close attention to these cases, and Wessels Sherman will keep its readers informed as new developments arise.

Questions? Contact attorney Joseph Laverty by email or at (563) 333-9102