The Federal Trade Commission (FTC), under the leadership of Lina Khan, has submitted a final plea to a U.S. appeals court to overturn a decision preventing the implementation of a rule that would nearly eliminate worker noncompete agreements. This legal move by the FTC comes prior to a leadership change at the agency, as President-elect Donald Trump is set to appoint Andrew Ferguson as the new FTC chair. Ferguson had dissented from the FTC’s April 2024 decision to issue the rule.
The Texas federal court’s ruling found that the FTC had overstepped its authority by creating the noncompete ban. The FTC, however, contends that the court unjustly vacated the rule on a nationwide basis. In its recent brief to the U.S. Court of Appeals for the Fifth Circuit, the FTC argued that the district court erred in granting universal relief beyond the specific parties involved in challenging the rule.
- The FTC has also been presenting its case in the Eleventh Circuit, defending against a preliminary ruling from a Florida court. This ruling, based on the “major questions” doctrine of the Supreme Court, suggests that the FTC does not have explicit congressional approval to enact the rule.
The FTC has claimed that banning noncompete agreements is integral to its mandate and will lead to increased employment opportunities and wages. Currently, approximately 20% of the workforce is bound by such agreements. The agency has faced pushback from companies like Ryan LLC and organizations such as the U.S. Chamber of Commerce, represented by notable law firms including Gibson Dunn & Crutcher LLP and Sullivan & Cromwell LLP.
As the Justice Department handles the appeals for the FTC, the case continues to unfold in the courts. The case is cited as Ryan LLC v. FTC, 5th Cir., 24-10951, and without further judicial intervention, the agency’s expansive noncompete rule remains in legal limbo.