Challenges to the FTC Rule
As we previously discussed on Med Law Blog, following the FTC’s approval of the final rule to ban non-compete agreements for for-profit businesses in April, several businesses have challenged the FTC’s authority to enforce this rule. The final rule is set to take effect on September 4, 2024, but in light of the number of challenges still pending, it’s unclear as to whether the FTC’s rule will remain intact. In one such challenge in the Northern District of Texas, the federal judge issued a preliminary injunction on July 3, 2024, that stays this ban for the named plaintiffs in the case, who were Ryan LLC, the Chamber of Commerce of the United States of America, Business Roundtable, the Texas Association of Business, and the Longview Chamber of Commerce. On or before August 30, 2024, the court intends to rule on the merits of the legal challenge that seeks to invalidate the rule for businesses nationwide.
In a separate challenge to the FTC’s rule in the Eastern District of Pennsylvania, ATS Tree Services, LLC claims that the FTC has exceeded its authority beyond what Congress intended. ATS provides tree removal services and firewood sales in Pennsylvania. To be able to effectively provide these services, ATS invests in its employees by offering specialized training in tree care skills. ATS employees sign a non-compete agreement, in exchange for receiving such training, that restricts an employee from directly competing with ATS for one-year following the employee’s termination of employment. According to ATS, by removing the ability to enforce these non-compete agreements, ATS risks losing these employees to competitors after investing a significant amount of time and financial resources, which could jeopardize its business. The motion for a preliminary injunction is still pending in this case, and a decision is expected to be issued on or before July 23, 2024.
Pennsylvania Healthcare Legislation Update
On a separate but related topic specific to healthcare providers in Pennsylvania, the Pennsylvania House of Representatives passed a ban for healthcare non-compete agreements in April, as we previously discussed. This bill, as passed by the Pennsylvania House, will be effective immediately for new restrictive covenants following a provider’s current license renewal. The bill was amended in the Pennsylvania Senate on July 10, 2024, and is currently under review by the Pennsylvania Senate’s Appropriations Committee. We will continue to monitor as this bill progresses through the legislative process, and we will update on this blog as further updates become available.
