FTC Non-Compete Rule Survives Second Legal Challenge

A Pennsylvania judge denied a bid to block the FTC’s rule banning nearly all non-compete agreements, marking the second failed attempt to stop the rule ahead of its September 4th effective date.

• FTC authority upheld: Judge Hodges of the Eastern District of Pennsylvania, a Biden appointee, denied the plaintiff’s (a tree service company) request for an injunction, holding that the FTC did not exceed its authority in issuing the non-compete ban.
   
• HRPA’s response: Association CEO Tim Bartl noted that HR Policy was "disappointed in the judge's decision and remains firm in its belief that the FTC's rule is beyond its legal authority," further noting that the Association "remains committed to finding a long-term solution to this issue that allows for the continued reasonable use of non-compete agreements while prohibiting their misuse, regardless of whether the FTC's rule goes into effect in September."
   
• One more shot: There is still a relatively good chance the rule will be blocked before it becomes effective, as a decision on the merits in an earlier Texas case is expected by August 30th. The judge in that case, while declining to initially issue a nationwide injunction, made it clear that he thought the rule was unlawful. The merits decision by the end of August will likely reach a similar conclusion, which could then extend the injunction nationwide.