FTC Ban on Non-Competes Upheld in Federal Court

A federal court in the Eastern District of Pennsylvania recently denied a private plaintiff-company’s attempt to block the FTC’s ban on employee non-compete agreements.  The opinion highlighted the FTC’s ability to, “ban practices it deems anticompetitive.”

The court’s opinion denied the plaintiff’s motion for a preliminary injunction that would have stopped the FTC’s ban from taking effect on September 4, 2024.  In denying the plaintiff’s motion, the court’s opinion upheld the FTC’s legal authority for imposing the ban, finding that plaintiff had failed to allege sufficient harm was likely to result from the ban going into effect.

This decision is a stark departure from the Northern District of Texas opinion from early last month.  In that case, a tax services firm and group of intervenors challenged the ban as an unconstitutional exercise of power by the FTC, and therefore asked the court to issue a preliminary injunction preventing the FTC from enforcing the ban, as well as staying the effective date of the ban.  Finding plaintiffs satisfied all four factors necessary for granting the preliminary injunction, the Northern District granted the preliminary injunction.  In addition to granting plaintiffs’ motion, the court’s opinion found the FTC lacked authority under Section 6(g) of the FTC Act to issue regarding unfair competition methods, such as non-competes.

Prior coverage regarding the FTC’s ban on non-competes is available here.