The ongoing preemption debates in the legal sphere continue to deepen as federal administrative agencies, including the Federal Trade Commission (FTC) and the National Labor Relations Board (NLRB), further engage in rulemaking and adjudicative efforts to prohibit non-competes and restrictive covenants. In a predictable response to this progression, defendants have begun to surface preemption arguments in state court when facing breach of contract claims related to the very same topic. JD Supra provides a comprehensive summary of these ongoing discussions.
The challenging issue at hand here is the balance between federal and state authority in the American legal system. Complicating this is the introduction of federal administrative agencies into the fray, pushing the boundaries of their rulemaking powers to try and eliminate non-competes and restrictive covenants, which are typically the purview of state law.
As a result, defendants accused of breaching contracts over these restrictive covenants are starting to put forth preemption arguments. The premise behind this strategy is the doctrine of preemption itself, which allows federal law to overrule conflicting state laws. Thus, if an agency like the FTC or NLRB rule that non-competes or restrictive covenants are illegal, the argument goes, those agency rulings should preempt any state laws allowing for such restrictions.
The increasing use of this approach in response to state court breach of contract claims raises new issues about federal power and its limitations, and poses fresh challenges for both the courts and legal professionals involved in these cases.