By: Adam S. Chotiner
August 21, 2024
Yesterday a federal judge in Texas issued a nationwide injunction blocking the FTC rule banning non-compete agreements from going into effect (click here to read the judge’s order). That same judge had issued a preliminary injunction on July 3 that only benefited the plaintiffs in that particular case. Finding that the FTC lacked the statutory authority to issue the rule, and that the rule was arbitrary and capricious even if the FTC had the necessary authority, the judge held the rule to be unlawful and blocked it on a nationwide basis. The rule had been scheduled to go into effect on September 4, 2024.
Yesterday’s ruling conflicts with an opinion issued on July 23, 2024, by a different federal judge in Pennsylvania, who upheld the FTC’s authority to issue the non-compete rule and refused to block it from going into effect. However, for now yesterday’s ruling stands and the FTC’s non-compete rule will not go into effect.
A third federal judge has also weighed in on the rule. Last week, a federal judge in Florida followed the lead of his Texas counterpart’s July 23 ruling by issuing a preliminary injunction that only applies to the specific parties in that case.
The competing orders issued by these judges will likely be appealed, and a conclusive ruling may ultimately require a decision from the U.S. Supreme Court, so we have not yet reached the end of the story on the FTC’s non-compete rule. But for now, businesses can pump the brakes on their efforts to comply with the rule and non-compete agreements will remain governed by existing law.
The Labor and Employment Law Practice Group at Shapiro, Blasi, Wasserman & Hermann advises businesses of all sizes on employment law compliance and provides creative and effective defensive approaches when claims are asserted. Each situation is different and this article does not constitute legal advice. Please do not hesitate to contact Adam S. Chotiner at achotiner@sbwh.law or (561) 477-7800, or visit our website at www.sbwh.law.
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