On July 23, 2024, a Philadelphia federal court denied a request to stay the effective date of the FTC's non-compete final rule ("Rule" or "non-compete Rule"). In ATS Tree Services, LLC v. Federal Trade Commission, et al., a federal judge from the U.S. District Court for the Eastern District of Pennsylvania held that the plaintiff did not establish irreparable harm to justify granting the injunction. Furthermore, the Court also found that the plaintiff failed to prove it was likely to succeed on the merits of the case.
This case is contrary to a decision in Ryan LLC et al. v. Federal Trade Commission from a federal judge in Texas who granted a motion to stay the effective date of the Rule on July 3, 2024, pending a ruling on the merits. We are still expecting the Texas court to issue a decision on the merits of the case by August 30, 2024, only days before the non-compete Rule is scheduled to take effect on September 4, 2024.
By way of background, the non-compete Rule makes it illegal for an employer to: (a) enter into or attempt to enter into a non-compete clause with a worker; (b) enforce or attempt to enforce a non-compete clause with a worker; or (c) represent that the worker is subject to a non-compete clause – with the exception for senior executives with an existing non-compete clause.
The non-compete Rule will take effect on September 4 unless there is some type of judicial intervention halting the Rule. However, there are still a number of legal challenges and decisions that can happen before September 4. We will continue to monitor the situation and provide updates as developments occur.
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