On May 13, I reported to you all that declarations from the Federal Trade Commission (FTC) of the death of non-competes may be premature. Here is what I said then:

The U.S. Chamber of Commerce and other entities have already filed federal court lawsuits seeking an emergency injunction against the regulations. There is reason to believe that these efforts will be successful and the FTC rules will be enjoined before the 120 day period expires. Those entities opposing the FTC regulations will no doubt invoke the “major questions doctrine” and assert that the FTC lacks the specific legislative mandate to impose such a dramatic change in the law.

Sure enough, in the last few weeks we see twin lightning bolts flash from the sky. First, on June 28, the U.S. Supreme Court, in Loper Bright Enterprises v. Raimondo, struck down the famous (or infamous, depending on your point of view) Chevron decision, which granted Executive Branch administrative agencies deference in interpreting the statutes, and issuing regulations.

Recall that the FTC, in issuing the non-compete ban, claimed their right to do so appeared (to them) to be “crystal clear.”

Now, on July 3, comes Ryan LLC v. FTC, N.D. Tex., No. 3:24-cv-986, and Judge Ada Brown who says (paraphrasing) “Not so fast” and stays enforcement of the FTC’s proposed non-compete ban. True, this decision only applied to the litigants, and failed to constitute a nationwide ban, but the logic of her decision may influence other courts and embolden them to issue such a ban. (Note also that this stay only applies until August 30, when she will issue her full ruling on an injunction, notably just before the planned effective date of September 4.)

According to Judge Brown, the FTC’s authority to impose a ban completely lacks the claimed crystal clarity. Indeed, the FTC foundation for its authority, its right to attack “unfair methods of competition” fails Judge Brown’s initial assessment of what constitutes proper statutory authority. As Judge Brown sees it, the question is not what the FTC thinks it should do, but what Congress has said it can do. And what does she proceed to cite? You guessed it: Loper Bright Enterprises v. Raimondo.

Judge Brown concludes that not only did the FTC lack statutory authority for the ban, the FTC acted “arbitrarily and capriciously.” Consider the gauntlet thrown down. What next?  For added spice, a parallel case currently brews in a Pennsylvania federal court.

Expect Ryan to be appealed quickly and aggressively to the Fifth Circuit and then to the U.S. Supreme Court. Get some popcorn ready, this could be real entertainment!

If you have questions, please contact David J. Carr or another member of the Workplace Solutions Group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.