FTC Wins Round Two in Its Non-Compete Ban Defense
The FTC aims to ban non-compete agreements, facing legal challenges. A Texas court questioned its authority, while a Pennsylvania court affirmed it. Further rulings are anticipated as the effective date approaches.
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The Federal Trade Commission (FTC) is attempting to ban nearly all employee non-compete agreements in the U.S. Following the issuance of its final rule, several lawsuits were filed challenging the FTC's authority. A Texas court ruled that the FTC likely lacked the authority to issue such a broad regulation, stating that its enabling statute only allowed for rules regarding "unfair or deceptive acts or practices." However, a subsequent ruling from a Pennsylvania court found that the FTC likely does have the authority to ban non-compete agreements. This court denied a tree care company's request for a preliminary injunction against the FTC's rule, citing the company's failure to demonstrate irreparable harm and affirming the FTC's power to issue substantive regulations on unfair methods of competition. The Pennsylvania court emphasized that the FTC Act does not differentiate between procedural and substantive regulations, allowing the FTC to prevent unfair competition. The legal battle continues, with another ruling expected from a Florida court and the Texas court set to decide on a final injunction by the end of August. The implications of non-compliance with the FTC's rule appear limited, as the FTC can only seek civil penalties after a formal complaint process. Employers with non-compete agreements are advised to consult legal counsel to navigate this evolving situation, especially with the September 4, 2024, effective date approaching.
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7 commentsThe free market works best when competition isn't stifled, and the name of the clause is literally a "non-compete".
I thought the outcome of Chevron being overturned (I.e. “3-letter-agencies can no longer unilaterally make laws”) would have come up here as well, since the FTC is part of the Executive Branch
(Not trying to comment on the underlying case. Don’t care to argue for or against NCs)
Related
Judge delays ban on noncompete agreements for employees
A federal judge delays noncompete ban for select employers, questioning FTC's authority. The ban aims to prevent job restrictions, but faces opposition from US Chamber of Commerce. Efforts ongoing to block ban nationwide.
Federal judge partially blocks U.S. ban on noncompetes
A federal judge in Texas partially blocks the U.S. government's ban on noncompete agreements, citing harm to businesses. The ruling delays the ban's enforcement for plaintiffs, questioning the FTC's authority. Noncompete debate continues between job flexibility advocates and confidentiality protection supporters.
Federal judge partially blocks U.S. ban on noncompetes
A federal judge in Texas partially blocked the U.S. government's ban on noncompete agreements, citing plaintiffs' likelihood of success and public interest. The FTC's ban aimed to enhance job mobility and competition.
Judge says FTC lacks authority to issue rule banning noncompete agreements
A Texas judge ruled FTC lacks authority to ban noncompete agreements, casting doubt on enforcement. Lawsuit questions FTC's rulemaking power. Final ruling expected by August 30, impacting enforcement on September 4.
Federal judge upholds FTC ban on noncompete agreements
A federal judge upheld the FTC's ban on noncompete agreements, affecting 30 million U.S. workers. ATS Tree Services plans to contest the ruling amid ongoing legal disputes over the FTC's authority.