ATS Tree Services, FTC noncompete lawsuit branches out

With all of the attention focused on the Ryan, LLC’s Texas lawsuit challenging the FTC’s noncompete rule and the now-stayed U.S. Chamber of Commerce’s lawsuit, the slow progress of the lawsuit brought by ATS Tree Services, LLC has gone largely unnoticed.

Here’s a quick update:

On May 14 (surprisingly late in the game), ATS Tree Services moved to stay the effective date of the ban and not enjoin its operation.

Following the same approach as Judge Ada Brown in the Ryan case, Judge Kelley B. Hodge in the Eastern District of Pennsylvania issued a scheduling order noting that she may not even need a hearing on the motion.

The schedule provides (in pertinent part) as follows:

  1. June 4, 2024: FTC’s deadline to file its opposition to ATS’s Motion for Preliminary Injunction. (This is six days after the FTC files its opposition to Ryan’s motion.)
  2. June 25, 2024: Deadline for ATS Tree Services to file its reply brief. (13 days after Ryan, the U.S. Chamber, and the other plaintiffs need to file their reply.)
  3. July 10, 2024 at 12:00 p.m ET: Tentative hearing date, “should the Court deem a hearing on ATS’s Motion necessary.” (Just over three weeks after the Ryan hearing, if one is necessary.)
  4. July 23, 2024: Court to issue its decision. (20 days after the Ryan decision.)

Mark your calendars!

If the challenges are unsuccessful, the rule will go into effect on September 4, 2024.

But what will happen if one is success and one is not? Expect many motions and lots of briefing, appeals, and confusion.

Stay tuned!

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Steps to take now

Want more background on the FTC’s noncompete rule and steps to take now? Take a look at FTC bans noncompetes: How will you protect your company’s information and keep your customers?

Key at this point is to be thinking about the following:

  • Reviewing and updating agreements and policies to ensure compliance with all of the new state-law developments. This includes, in particular, noncompetes, broad confidentiality agreements, and other agreements in the crosshairs (including no-recruit agreements, nonsolicitation agreements, anti-moonlighting provisions, and training repayment agreements (pejoratively called “TRAPs”)), as well as internal policies that my be treated like impermissible restrictions on employee competition.
  • Reviewing and updating procedures (including the use of data loss prevention software) for protecting trade secrets, other confidential information, and goodwill (see trade secret protection program primer and checklist).
  • Using supplemental agreements and approaches to mitigate the impact of the tightening restrictive covenant laws. For example:
    • Notice provisions (“true” garden leave clauses) may, to the extent enforceable, offer meaningful protection for a short term. Even the FTC’s new Rule acknowledges that these agreements fall outside the scope of the Rule.
    • Springing noncompetes (a court-ordered noncompete as a remedy for a violation of other restrictive covenants or obligations) may create both a deterrence effect and provide a partial remedy for wrongdoing that is discovered early enough. This is a tool created years ago for a client who did not want to use a noncompete, but was worried about the impact of employees violating the other restrictive covenants. It has since been incorporated into Massachusetts noncompete law (MNAA, G.L. c. 149, § 24L(c)).
  • Emphasizing training. Never lose sight of one of the easiest and most effective tools you have is to educate and train employees, especially at onboarding and off-boarding, and with special attention to employees working remotely.

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Additional resources: 

We know how hard it is to keep up with the ever-changing requirements around the country. To help, we have created the following resources (available for free):

We hope you find all of these resources useful. More are coming.

And please note that we are grateful for all of the input we’ve received over the years, and welcome any suggestions for improvements that you may be willing to share.

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*A huge thank you to Erika Hahn for all of her extraordinary help in tracking and monitoring all of the bills around the country and helping me make sure that all of our resources are current and accurate.