On Tuesday, July 23, 2024, Eastern District of Pennsylvania Judge Kelley Brisbon Hodge declined to enjoin application of the FTC’s administrative rule banning the majority of non-competes in the country (the “Rule”) when she denied ATS Tree Services, LLC’s (“ATS”) motion for a stay and a preliminary injunction. While the Court’s order is not a final determination on the merits of ATS’s claims, the Court held in its order both that ATS is not likely to suffer irreparable harm and that ATS is unlikely to succeed on the merits of its challenge to the Rule.

In so holding, the Court concluded that Congress lawfully delegated authority to the FTC to engage in substantive rulemaking and that the FTC had the authority under the Federal Trade Commission Act to issue the Rule. This is in stark contrast with an order previously issued by Judge Ada Brown from the Northern District of Texas, which we discussed here.  It seems likely that the reasoning of both Courts will be subject to appeal.

As a practical matter, Judge Hodge’s July 23 order does not change much. The Rule is still scheduled to go into effect for most employers on September 4, 2024. That is not necessarily to say that it will though. It will be interesting to see whether Judge Brown issues an order striking down the Rule before September 4 or whether another federal judge in an unrelated case enjoins application of the Rule for all U.S. employers prior to the effective date. Only one thing is certain: further litigation over the Rule is inevitable. Saul Ewing will continue to track any developments.