In April, the Federal Trade Commission (FTC) sent shockwaves across the nation when it issued an administrative rule that will essentially ban all noncompete agreements when it goes into effect on September 4, 2024.

Not surprisingly, various business groups, including the U.S. Chamber of Commerce, have promised to challenge the FTC’s rule in court, calling it unconstitutional, arbitrary and capricious. On July 3, 2024, a federal judge in Texas issued a preliminary order stating that the plaintiffs were likely to prevail on their challenge. The judge promised to issue a final decision by the end of August. Based upon the strong language used by the judge in her preliminary order, it appears very likely that the court will declare the FTC’s rule unconstitutional.

But the litigation won’t end there. Whether the judge’s final ruling upholds or strikes down the FTC rule, there will be an appeal to the U.S. Court of Appeals for the Fifth Circuit. Ultimately, the case may find its way to the United States Supreme Court, although it is unclear whether the Supreme Court would actually issue a substantive ruling.

We will continue monitoring this crucial legal development and keep you updated.