**UPDATE**
On July 3, 2024, the U.S. District Court for the Northern District of Texas issued a preliminary injunction barring the Federal Trade Commission (“FTC”) from enforcing its rule banning non-competes (“Rule”). The court ruled that it is likely that the plaintiffs will succeed on the merits of their claims. The injunction applies to the named plaintiffs in the suit only, but the court has indicated that will issue a final ruling by August 30, 2024. This date is important as the Rule takes effect on September 4, 2024, and all employers are required to notify current and former employees bound by noncompete agreements that they will be invalid. This notice is required to be made prior to September 4, 2024.
In a second challenge to the Rule in the U.S. District Court for the Eastern District of Pennsylvania, the court has scheduled oral arguments for a similar request for an injunction for July 10, 2024, and has indicated that it will rule on that motion by July 23, 2024.
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On April 23, 2024, the Federal Trade Commission (“FTC”) voted 3-2 to adopt a final rule that constitutes a comprehensive ban of noncompete agreements, both existing and future (“Noncompete Rule”).
The FTC derives its authority through a claim that it is an unfair method of competition for employers to enter into noncompete agreements with workers. However, as of the day following the FTC vote there have already been two lawsuits filed challenging the legality of the Noncompete Rule. There are likely to be more challenges, and the best strategy for employers and those bound by noncompete agreements is to remain patient while these challenges play out.
With that said, here is an outline of the Noncompete Rule:
We will monitor challenges to the Noncompete Rule. Please don’t hesitate to reach out to Gielow Groom Terpstra & McEvoy with any questions you have regarding this matter.
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