Second federal court finds that FTC exceeded its authority in passing Non-Compete Rule
On August 15, in Properties of the Villages, Inc. v. Federal Trade Commission, a second federal court found that the Federal Trade Commission (FTC) exceeded its authority in passing its broad Non-Compete Rule (the Rule), which effectively bans most non-competition agreements with few exceptions. The Villages brought suit against the FTC seeking an order from the Middle District of Florida staying the current September 4 effective date of the Rule and preliminarily enjoining enforcement of the Rule. The Court found that the Villages established a substantial likelihood of success on the merits of at least one of its arguments, and although the Court did not implement a national stay or preliminary injunction, it did grant a stay and preliminary injunction as to the Villages.
The Villages decision comes mere weeks after a Texas federal court reached a similar conclusion in Ryan LLC v. Federal Trade Commission, but a Pennsylvania court reached a contrary conclusion in ATS Tree Services, LLC v. Federal Trade Commission, et al. This decision also comes less than three weeks before the current effective date of the Rule, September 4, 2024.
While the Villages decision is another indication that the Rule may be held unenforceable and invalid, no court has issued a nationwide injunction, to date. The Ryan court still intends to rule on the ultimate merits of that action on or before August 30, 2024, at which point it is still possible that the Court will issue a nationwide injunction. Regardless of the decision made on August 30, employers can anticipate additional guidance on the Rule at that time.
Please consult your McDonald Hopkins attorney if you have questions about the Rule or what employers should do as they await a ruling from the Ryan court on August 30th.
