Miles & Stockbridge attorneys participated today in a call with the U.S. Chamber of Commerce for an update on litigation the Chamber has filed to stay or enjoin the effectiveness of the FTC rule banning almost all employee non-competes. (Click here to read our summary of the rule.)

Here are some key takeaways from the call:

• The Chamber filed a lawsuit in U.S. District Court for the Eastern District of Texas challenging the rule and seeking to stay or enjoin the effectiveness of the rule pending a final decision on the merits of the case.
• The Chamber has advanced several legal theories in the case:
• the FTC has no legal authority to issue regulations on unfair methods of competition;
• even if the FTC had some authority to do so, it still cannot prohibit all non-competes because many non-competes are pro-competitive;
• the FTC cannot retroactively void existing contracts; and
• the rule is arbitrary and capricious because the FTC ignored the benefits of non-competes and failed to consider more targeted approaches.
• Without a stay, it is estimated that the rule would go into effect in late August or early September.
• There are currently two other federal lawsuits challenging the rule – one filed in the Northern District of Texas and one in Pennsylvania.
• A decision on the motion to enjoin or stay might be issued in eight-to-10 weeks.
• The scope of any injunction is unclear at this point; it could be nationwide or it could only apply to the Chamber and other business groups involved in the lawsuit (and their members).

Miles and Stockbridge’s labor and employment lawyers will be monitoring developments related to the new rule. Stay tuned for future blog posts with updates on when (and whether) the new rule will go into effect and its impact on specialized industries, including technology companies, government contractors and the health care industry.

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