We have had some conflicting rulings on the Federal Trade Commission’s (“FTC”) rule to ban the use of noncompete clauses this month.  Earlier this month, a federal district court in Texas issued a preliminary injunction that enjoined the effective date of the FTC’s noncompete ban (currently, September 4, 2024).  This court decision is limited to the named plaintiffs in the case and is pending the court’s final decision on the merits of the case (which is expected to be some time at the end of August).

In another challenge to the FTC’s rule to ban noncompete clauses, this week a federal district court in Pennsylvania decided not to issue a similar injunction to enjoin the effective date of the noncompete ban.  In siding with the FTC, the court found that the FTC does have the requisite legal authority to issue rules such as the rule to ban noncompete clauses.  These opposite decisions create a divide in the judiciary over the FTC’s regulatory authority in this rulemaking area.

We will continue to monitor this situation, including any future litigation and any appeal(s), very closely to see what impact these rulings may have on the effective date of the final rule.  As a reminder, we have previously provided overviews of the FTC’s rule to ban noncompete clauses here and here.  If you have any questions or comments about the status of the FTC’s noncompete ban or its impact on any agreement(s) your institution may have in place, feel free to contact us.