fTC ’ Snon-CompeTeClauSerule – noTSofaST labor & Employment law Section Chairs : AmandaBiondolino – AmandaL . BiondolinoPLLC & RaquelJefferson – PhelpsDunbar
A big story in employment law this year was the Federal Trade Commission ’ s Non-Compete Clause Rule ( the “ Rule ”). States have historically regulated non-competes , but the federal Rule , published May 4 , 2024 , would have prevented businesses nationwide from entering into and enforcing non-compete agreements , with limited exceptions , starting September 4 , 2024 .
Statutory Authority
Pursuant to the FTC Act , the FTC is “ empowered … to prevent persons , partnerships , or corporations … from using unfair methods of competition … and unfair or deceptive acts or practices in or affecting commerce .”
15 U . S . C . § 45 ( a )( 2 ). Moreover , Congress delegated the FTC the power to “[ f ] rom time to time classify corporations and … to make rules and regulations for the purpose of carrying out the provisions of ” the Act . 15 U . S . C . § 46 ( g ).
Litigation
Multiple lawsuits were filed to enjoin the Rule ’ s implementation , with conflicting results .
• First , on July 3 , 2024 , the Northern District of Texas granted a motion for preliminary injunction , finding the FTC likely exceeded its statutory
onaugust20 , theryan courtprovidedsome claritybyenteringan ordergrantingsummary judgmenttothe plaintiffsand “ setting asidethenon-Compete rule .” Thecourtruled thatthisban “ has nationwideeffect .” authority by issuing the Rule , which was “ arbitrary and capricious .” The injunction was not nationwide but applied only to the plaintiffs in the action . Ryan , LLC v . FTC , No . 3:24-cv-00986-E ( N . D . Tex .).
• Second , on July 23 , 2024 , the Eastern District of Pennsylvania refused to preliminarily enjoin the Rule , concluding “ the FTC acted within its authority under the Act in designating all non-compete clauses as ‘ unfair methods of competition .’” The court found “ it clear that the FTC
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