FTC Noncompete Case in Pennsylvania Continues Despite Texas Loss

A federal judge in Pennsylvania will allow a case challenging the Federal Trade Commission’s near-total ban on worker noncompetes to proceed despite a Texas court vacating the regulation.

“The fact that the rule is currently enjoined does not mean that it is forever gone,” Judge Kelley Brisbon Hodge of the US District Court for the Eastern District of Pennsylvania, said in a Thursday order.

ATS Tree Services LLC, a tree care company that sued the FTC over its noncompete ban, moved for a stay in the Pennsylvania proceedings after judge in Texas set aside the rule on nationwide basis. But Hodge noted in a five-page order that the decision is not binding on her court, which she said has an “obligation” to hear cases before it and render its own determinations.

Hodge in July rejected ATS Tree Service’s motion for a preliminary injunction, finding that the FTC had clear authority to issue substantive rules relating to unfair methods of competition. A month later, Judge Ada Brown of the US District Court for the Northern District of Texas reached the opposite conclusion in a final decision stemming from a separate challenge from the Chamber of Commerce and a Texas-based tax firm.

The FTC, which issued the rule in an 3-2 party-line vote in April, faces an Oct. 19 deadline on whether to appeal that decision to the Fifth Circuit.

Roughly 20% of the US workforce is subject to noncompete agreements, which generally place restriction on the ability to switch jobs, the FTC estimates. The agency has disputes such contracts hurt worker wages and opportunities.

ATS Tree Services is represented by the Pacific Legal Foundation.

The case is ATS Tree Services LLC v. FTC, ED Pa., 2:24-cv-01743, 10/3/24.