FTC: It may be more than a year before a court greenlights our non-compete rule — if at all

The Federal Trade Commission, the architects of the sweeping noncompete ban that a federal judge in Texas set aside last month, told a federal judge in Pennsylvania yesterday that an appeal of the Texas decision “would likely take months to fully brief and could take a year or longer until a final decision.”

Of course, this presupposes that the FTC appeals the Texas decision, which it hasn’t committed to yet.

But let’s rewind a bit.

In July, a Pennsylvania federal judge denied an employer’s request to enjoin the noncompete rule, concluding that the plaintiff “failed to establish a reasonable chance, or probability, of winning.” The following month, a federal judge in Florida enjoined the noncompete ruling for a single plaintiff. Later in August, the Texas federal judge set aside the noncompete ban nationwide.

With the noncompete rule set aside for all employers, the company that lost its injunction bid in Pennsylvania asked the federal judge to stay its lawsuit rather than decide it on summary judgment “because there is nothing to litigate” and “a temporary stay would promote judicial economy” without harming the FTC.

The FTC, however, saw things differently. It opposed the Pennsylvania plaintiff’s stay request for three reasons:

First, it argued that the Pennsylvania judge could enter an order to “overtake Plaintiff’s claims” in the Pennsylvania lawsuit. Should the FTC appeal the Texas or Florida rulings, “fundamental constitutional and equitable principles establish that a court should limit relief to the plaintiffs where that relief is sufficient to remedy the plaintiffs’ injuries.”

Second, the FTC believes it would harm the public interest to delay proceedings because staying the case may “deprive other courts and the judicial system of the benefits that would flow from [the Pennsylvania court’s] consider views” on whether the FTC rule is lawful.

Third, staying the proceedings would give the plaintiff in Pennsylvania “two bites at the apple” because it lost its injunction bid while reaping the benefits of the Texas judge’s nationwide injunction. Later, if that decision is overturned, the Pennsylvania plaintiff would seemingly seek to reactivate the lawsuit to attempt to win there on the merits.

But seriously, suppose the FTC convinces the Pennsylvania court not to stay the case and then prevails in the lawsuit, i.e., the judge determines that the FTC noncompete rule is lawful. Does that mean that the FTC will seek to enforce the noncompete rule only for the Pennsylvania plaintiff while the rule remains set aside for all other employers nationwide? If so, that takes pettiness to another level.

For the rest of you, if you’re wondering how your business should address noncompetes going forward, check out this article co-authored by my partner, Dave Renner.