🚨A Pennsylvania federal judge DENIED an employer’s request to block the FTC’s non-compete rule.🚨

Do you remember that scene from Rounders, right after Mike McDermott spots Teddy KGB’s poker “tell,” when Teddy laments, “Hanging around…hanging around… kid’s got alligator blood. Can’t get rid of him.“?

It feels that way, with the Federal Trade Commission’s non-compete Rule imposing a comprehensive ban on new non-competes with all workers.

Yesterday, a Pennsylvania federal judge denied an employer’s request to enjoin the Rule, concluding that the plaintiff “failed to establish a reasonable chance, or probability, of winning.”

The plaintiff, a tree care company that required its employees to sign non-compete agreements prohibiting them from working for direct competitors following the separation of their employment, had argued to the court that the FTC exceeded its statutory authority by creating the Rule. Indeed, earlier this month, a Texas federal judge concluded that Congress did not afford the FTC statutory authority to create substantive rules like the non-compete Rule. But Judge Kelley Brisbon Hodge disagreed.

Judge Hodge found it “clear that the FTC is empowered to make both procedural and substantive rules as is necessary to prevent unfair methods of competition.” Notably, “procedural” and “substantive” do not appear in the FTC Act. Therefore, Congress presumably did not seek to limit the FTC. Further, “the ordinary meaning of the statutory text provides the FTC with the authority to promulgate rules prohibiting unfair methods of competition” with no countermanding restrictions. Moreover, Section 5 of the FTC Act empowers and directs the agency to “prevent” unfair competition. Thus, the FTC did just that by promulgating the Rule.

The court also noted that circuit courts had already confirmed the FTC’s substantive rule-making authority. For example, the Second Circuit acknowledged the FTC’s “broad . . . power to declare trade practices unfair.” Here, the court accepted the FTC’s findings “through an extensive and thorough research and rule-making process” that non-compete clauses are “not justified by legitimate business purposes,” generally “exploitative and coercive” that “trap workers in worse jobs.”

But wait a minute! Isn’t the FTC stepping on the toes of states by regulating non-competes? Not really, concluded Judge Hodge:

The Court agrees that the states and federal government have shared jurisdiction in this area, and that the existence of state regulations of non-competes does not preclude the FTC from issuing rules to prevent unfair methods of competition.

Even if the court had concluded that the plaintiff was reasonably likely to prevail on the merits, it determined it would not suffer irreparable harm, even though its efforts to comply with the Rule may result in nonrecoverable expenses.

So, all eyes now turn to Florida, where another similar injunction request is still pending.

But, for now, the Rule is still “hanging around” and will take effect on September 4, 2024.