The Federal Trade Commission's ban on noncompete clauses is facing a preliminary injunction from a federal judge, and that injunction could potentially only apply to the plaintiffs suing the FTC, National Law Review reported July 22.
Here are 10 things to know:
1. The preliminary injunction prevents the ban from taking effect Sept. 4 while the court considers whether the FTC has authority to ban noncompetes. U.S. District Judge Ada Brown sided with the U.S. Chamber of Commerce and tax-preparation company Ryan LLC.
2. The district court’s decision provides relief to only the plaintiffs in the Ryan LLC case and does not restrict the FTC from enforcing the ban against other employers, according to the National Law Review.
3. The Chamber filed a motion for reconsideration seeking to expand the preliminary injunction to all businesses, but the court denied the motion in a supplemental ruling.
4. The court stated its intent to issue a ruling by the end of August.
5. According to National Law Review, plaintiffs did not request a nationwide injunction and that recent case law instructed that nationwide injunctions are disfavored. Additionally, the Chamber did not seek associational standing for nationwide members.
6. However, Ms. Brown said the lawsuit its "likely to succeed on the merits [as] the FTC lacks statutory authority to promulgate the noncompete rule."
7. Other cases against the ban remain pending, which may affect the enforceability of the rule before Sept. 4.
8. The FTC voted 3-2 to issue the rule in April, which makes it illegal to include noncompetes in employment contracts unless the employer is a nonprofit and requires companies with noncompetes to inform workers that they are void.
9. According to court documents obtained by Becker's, the court will rule on the merits of the challenge by Aug. 30, but a review so far indicated the ban will be struck down.
10. ASCA, which represents ASCs across the U.S., is opposed to the ban. The association submitted a comment to the FTC opposing the final rule, stating "surgery centers and other tax-paying healthcare providers would be subject to restrictions that tax-exempt systems would not."