Two lawsuits seek to block the Federal Trade Commission (FTC) ban on noncompete agreements from taking effect as scheduled on Sept. 4.
Within hours of the Federal Trade Commission (FTC) issuing its ban on noncompete agreements in April, two plaintiffs—Ryan LLC and ATS Tree Services LLC—filed lawsuits in the U.S. District Courts for the Northern District of Texas and the Eastern District of Pennsylvania, respectively. Both suits seek to block the rule from taking effect as scheduled on Sept. 4, arguing that the FTC has overstepped its statutory authority.
Last week, an initial ruling in the case of Ryan LLC v. Federal Trade Commission partially blocked the rule by granting a preliminary injunction. The injunction is limited to the plaintiffs and does not extend to their members or beyond. However, in delivering this ruling, the judge signaled that the plaintiffs are likely to succeed in their challenge, which will be decided on or before Aug. 30. The anticipated decision could include a nationwide permanent injunction preventing enforcement of the FTC rule.
The lawsuit filed by Ryan LLC has received the most attention and was joined by the U.S. Chamber of Commerce, the Business Roundtable, the Texas Association of Business and the Longview Chamber of Commerce.
Meanwhile, the ATS Tree Services, LLC v. Federal Trade Commission case could be decided before the Ryan LLC case. Oral arguments were heard yesterday and the court is expected to issue its decision regarding a preliminary injunction on July 23.
Update: Oral arguments were heard July 10 and on July 23 the judge denied ATS Tree Services' motion for a preliminary injunction.
With these cases being decided in district courts, they are subject to appeal and could eventually wind up being decided by the U.S. Supreme Court.
Throughout this process the Big “I" has voiced concerns with the FTC rule through oral testimony and written comments. What is most concerning about the rule is how the FTC has bypassed congressional authority. If left unchecked, that action could set a dangerous precedent to overreach in other areas.
Nathan Riedel is Big “I" senior vice president of federal government affairs.
