As we’ve discussed before, the Federal Trade Commision’s attempt to ban most employee non-compete agreements in the U.S. has sparked legal challenges. There have been two notable appeals, one in Texas and the other in Pennsylvania, with both cases sharing similar claims about whether the FTC has the authority to issue such a ban. On July 3, 2024, a federal court in Texas ruled that the FTC likely lacked the authority to issue such a broad rule, and has prevented it from taking affect against the plaintiffs. This was a preliminary ruling, with a final decision coming some time in August.
Now, a federal court in Pennsylvania ruled the opposite. In the case of ATS Tree Services v. FTC, Judge Kelley Hodge ruled that the FTC likely does have the authority to ban non-competes, as it has legal authority to issue “procedural and substantive rules as is necessary to prevent unfair methods of competition.” These conflicting rulings set the stage for further legal battles, which could potentially lead to the case landing with the Supreme Court. These decisions also create confusion about what is going to happen on September 4, 2024, the date that the ban is supposed to go into effect. We will update once the final decision in the Texas case is issued but for now the important thing for clients to know is that non-competes are still generally legal and enforceable.
****Special thanks to our clerk Margaret De Fer for staying on top of these developments and drafting these posts. She is no doubt learning far more than she probably wants to about non-compete laws.
