FTC Non-Compete Rule Update: Uncertainty Remains as Federal District Courts Issue Conflicting Preliminary Injunction Rulings
Date: 07/29/24
On July 3, 2024, the U.S. District Court for the Northern District of Texas, in a challenge to the validity of the Federal Trade Commission’s (the “FTC”) new non-compete rule, granted the plaintiffs’ motion for a preliminary injunction and stayed the rule’s effective date as to the plaintiffs only, concluding that the plaintiffs were likely to succeed in showing that the FTC overstepped its authority when issuing the noncompete
rule. Subsequently, on July 23, 2024, in a similar challenge to the rule’s validity, the U.S. District Court for the Eastern District of Pennsylvania denied the plaintiff’s motion for a preliminary injunction to stay the rule’s effective date, concluding that plaintiff was unlikely to succeed in challenging the non-compete rule and that plaintiff had failed to show that it would suffer irreparable harm absent an injunction. Subject to
further judicial developments, the non-compete rule remains scheduled to come into effect for all parties other than the plaintiffs in the Texas case on September 4, 2024.
This memorandum addresses, in a question-and-answer format, recent judicial developments involving the FTC’s non-compete rule, as well as several nuances and ambiguities employers should keep in mind when assessing employee non-competes and other restrictive covenants in the event the FTC’s noncompete rule ultimately comes into effect.
CGR Memo - FTC Non-Compete Rule Update Uncertainty Remains as Federal District Courts Issue Conflicting Preliminary Injunction Rulings.pdf (pdf | 291.23 KB )