Less than two weeks after a Texas federal court declined to issue a nationwide preliminary injunction enjoining the Federal Trade Commission (“FTC”) rule banning most employee noncompetition agreements (the “Noncompete Rule”) from going into effect, except as to the plaintiff in that case, a Pennsylvania federal court refused to enjoin the Noncompete rule from going into effect.

On July 23, 2024, the U.S. District Court for the Eastern District of Pennsylvania denied a motion for a nation-wide preliminary injunction against the Noncompete Rule. The judge concluded that the company would not be able to establish the "irreparable harm" necessary to issue such an injunction. Moreover, the judge determined that the company is unlikely to succeed in its claims that the FTC does not have the statutory or constitutional authority to enforce the ban, noting that “the FTC is empowered to make both procedural and substantive rules as is necessary to prevent unfair methods of competition.” This holding starkly contrasts with the decision in the Texas federal court where the court concluded that “the FTC lacks the authority to create substantive rules through this method.”  

The case in the U.S. District Court for the Northern District of Texas is scheduled to issue its ruling on the ultimate merits of the injunction by August 30, 2024, six days before the Noncompete Rule is scheduled to go into effect.

EGS will continue to monitor any developments regarding the FTC Noncompete Rule. In the meantime, employers should remain aware that all state laws relating to non-competes remain in force and employers must still comply with them.

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If you have questions or would like additional information, please contact our Labor & Employment attorneys or the primary EGS attorney with whom you work.