On Wednesday, July 3, 2024, the federal district court judge in Texas issued her ruling on the FTC’s rule to ban non-competes. At issue before the court was the plaintiffs’ motion for a preliminary injunction, which would have placed the non-compete ban on hold while the parties continued in the lawsuit moving forward. The FTC argued that the rule was reasonably based on the FTC’s authority as provided by Congress and was therefore enforceable.
As I mentioned a few weeks ago, the judge had announced that she would issue her decision on the motion on or before July 3, 2024. While I suspected that she would issue an injunction, the question would be whether her ruling would be limited to just the parties in the current lawsuit or if it would issued nationwide. A nationwide preliminary injunction would keep the rule from being enforced against businesses across the country.
Now we have an answer. The court DID issue an injunction, but the court limited to the injunction to just the plaintiffs in the case, a company called Ryan, LLC, along with the U.S. Chamber of Commerce. The court declined to issue a nationwide injunction, so the FTC’s non-compete injunction remains in place for every other employer in the country and will go into full effect on September 4, 2024.
BUT….
The court also ruled that the FTC likely exceeded its statutory authority and that the plaintiffs are likely to win on the merits of their lawsuit. This means that when the court issues its final merit ruling by August 30, 2024, I would expect that the court strikes down the FTC’s rule in total. The court could, at that time, decide to issue a broader preliminary injunction. But there will be plenty of appeals as these cases make their way up to the higher courts.
At this point, the FTC’s ban on non-compete agreements is still alive, but I would expect that the rule will be struck down by August 30. For South Carolina employees, my advice remains the same: have your existing non-compete agreement reviewed by a South Carolina non-compete lawyer to see what your legal options are.
