We just finished watching an open meeting of the FTC. By a vote of 3-2, the Commission voted to approve a final rule that would ban noncompete agreements (as well as require employers to rescind such agreements that are currently in effect). The dissenting commissioners believed, among other reasons, that the FTC did not have the constitutional authority to take such action.
Litigation Begins
We expected litigation, and it sure didn’t take long! Ryan, LLC (a global tax services firm based in Dallas, Texas) has already filed suit against the Federal Trade Commission. Ryan, LLC has asked the court to declare the FTC’s action unconstitutional and to vacate the FTC’s rule banning noncompete agreements.
The lawsuit has been filed in the Northern District of Texas – Dallas Division and landed in Judge Ada Brown’s court. The cause number is 3:24-CV-00986-E. Judge Brown is an appointee of President Donald Trump, and she previously served as a 5th Court of Appeals Judge (state appellate court judge), a Dallas County criminal court judge, a member of the Dallas County District Attorney’s Office, and a litigator with the McKool Smith law firm. Of note, the former U.S. Secretary of Labor, Eugene Scalia (also the son of deceased U.S. Supreme Court Justice Antonin Scalia), is one of the lawyers for Ryan, LLC. So, this is clearly a case to determine the validity of the FTC’s action.
An interesting note is that the lawsuit does not seek any preliminary injunctive relief. So, as of right now, there is nothing in this lawsuit on which Judge Brown could rule to immediately pause or stop the rule’s implementation.
Second Lawsuit Filed
A second lawsuit was filed challenging the FTC’s rule banning noncompete agreements. This time, it’s a lawsuit filed in the Eastern District of Texas – Tyler Division that landed in Judge J. Campbell Barker’s court. The cause number is 6:24-CV-00148-JCB. Judge Barker is an appointee of President Donald Trump, and he previously served as a lawyer in the U.S. Department of Justice, as a private practice lawyer, and as Deputy Solicitor General for the State of Texas.
This lawsuit was filed by the U.S. Chamber of Commerce, the Texas Association of Business, the Business Roundtable, and the Longview Chamber of Commerce. This lawsuit also seeks injunctive relief.
An interesting note is that back in early March of this year, Judge Barker vacated the NLRB’s final rule regarding joint employer status, so he has already shown a willingness to throw out agency rules. Based on that, we think this lawsuit (if not the other) all but guarantees the FTC rule is vacated. Stay tuned…
More information will be known once the final rule is published and we see the scope and nature of the ban and what litigation ensues.
Here is a link to the FTC fact sheet on the final rule.
Questions?
If you have any questions, do not hesitate to reach out to us.
info@simonpaschal.com
972-893-9340
