As previously reported, the US District Court for the Northern District of Texas issued an injunction prohibiting the Federal Trade Commission (FTC) from enforcing its non-compete ban, which is set to take effect on September 4. That ruling, however, was limited to the plaintiffs in that case. Similarly, the US District Court for the Eastern District of Pennsylvania had a request before it and denied issuing an injunction against the FTC. It found that the plaintiff, ATS Tree Services, LLC, could not show irreparable harm, but, more importantly, it also found that plaintiff failed to show a likelihood of success on its claims that (1) the FTC does not have authority to issue a nationwide non-compete ban, and (2) the FTC Act unconstitutionally delegates legislative power to the FTC. The Pennsylvania court’s decision on “likelihood of success” is at odds with the finding of the Texas district court, which is an indication that the fate of the FTC non-compete ban will likely be resolved by the federal appellate courts and potentially the US Supreme Court. The Texas district court is scheduled to issue a final decision in the case on August 30, which could negate the non-compete ban for all employers — at least until the appeals courts and the Supreme Court have a say in the matter.
If you have questions regarding the effects of these decisions on your non-compete agreements, please contact a member of our trade secret team.