By Greg Care
As we’ve discussed in prior blog posts, there is an ongoing legal fight over the fate of the Federal Trade Commission’s (FTC) rule banning nearly all employment non-compete provisions nationwide. The two fronts of this fight remain—for now—in the appellate courts of the Fifth Circuit (Ryan LLC v. Federal Trade Commission, No. 24-10951) and the Eleventh Circuit (Properties of the Villages, Inc. v. Federal Trade Commission, No. 24-13102). As I discussed in November, speculation abounds on what will become of these appeals and the FTC rule now that the new Trump Administration has begun. The following is my take on the “tea leaves” that have come from recent filings in these cases. What I see suggests that the FTC will be abandoning the defense of the non-compete rule, which may spell its demise.
The FTC filed appeals and opening briefs in both cases prior to the start of the new Trump Administration. Amidst the speculation that the FTC under Trump might abandon the appeals (thus, leaving in place a nationwide injunction against the FTC’s rule), a group called the Small Business Majority and two individuals moved to intervene in both cases to continue the defense of the FTC’s rule should the FTC back out. It was notable that, on January 23, the FTC opposed those motions to intervene. My sense is that, ordinarily, a government agency would not proactively oppose someone’s effort to support its rulemaking. The opposition, therefore, is indicative that the FTC is likely to do exactly what the proposed intervenors fear: stop defending the rule.
What is more, the FTC’s oppositions to the motions contained clues that this about-face might be coming. For example, the FTC recited facts about the rulemaking and defense of it only in the past tense. It noted, factually, that the agency issued the rule and has defended it. However, what is revealing to me is the absence of any statement of intent to continue that defense in places you’d expect to see it.
Several passages from the oppositions struck me as indications that a full retreat is coming. In the FTC’s introduction, it addressed the proposed intervenors’ desire “to enter the case to defend a Rule
issued by the Commission in the event the Commission itself decides not to do so,” which expressly acknowledges the possibility. The sentences that followed explained that the Commission’s choice to do that for its own reasons should not be disturbed. They read less like a hypothetical and more like a foreshadowing, especially since it was not followed up with a caveat that such a scenario is not happening.
On the same note, in responding to the proposed intervenors’ argument that they should be allowed to defend the rule if the FTC stopped doing so, the FTC wrote: “The Commission has defended the Rule in the district court, appealed an adverse final judgment, and filed an opening brief on appeal. As movants acknowledge, the Commission has represented the public’s interests, consistent with Congress’s decision to vest the Commission with statutory authority to defend its actions.” In the ensuing paragraphs, the FTC said any argument that it might stop defending the rule was a “speculative,” but did not go on to dismiss it as untrue. Several times, the FTC stopped short of saying that it would continue with the appeal. Because a statement like that strikes me as a relevant consideration in deciding the motion, its omission is telling.
Other language from the FTC’s oppositions hints at an impending shift in the litigation. While discussing the FTC’s prerogative to defend rulemakings, the FTC conspicuously noted that “the Commission has
voting procedures and processes governing the defense of litigation challenging Commission actions, including rulemakings . . . .” This was written in the context of what the FTC has done in the past. Again, there was no pledge to continue that defense and the reference to the voting procedures only underscores for me the likelihood of an upcoming re-vote to dismiss the appeals once there is a change in the membership on the Commission.
The FTC is now chaired by Andrew Ferguson, who opposed the rule. Commissioner Melissa Holyoak also voted against it. On his first day in office, President Trump nominated Mark Meador, a Republican, to replace former Chair Lina Khan on the Commission after he is confirmed by the U.S. Senate. It is expected that he will offer the deciding vote on dropping the appeals. For now, Lina Khan remains on the Commission until she is replaced or resigns. According to media reports, she has notified FTC colleagues of her intent to resign in the coming weeks. Until then, it appears the FTC leadership is in a stalemate on this matter.
One other potential sign of what is to come is that, on January 23, the FTC obtained from the Eleventh Circuit an extension of time to file its reply brief to March 7. While it is possible that the request is owing only to a desire to invest more time into a vigorous response, it could also be seen as a means to put off the decision to defend or abandon the rule until the FTC leadership changes are complete. The latter would be consistent with the timeline of Lina Khan’s resignation and the possibility of quick action by the Senate to confirm Mark Meador.
Once again, it appears that the important work of curtailing or eliminating non-competes will fall on the states to do. So, it remains vitally important to understand the law in each state and advocate where possible to protect workers.
If you have questions regarding non-competes in your situation, please contact us today to see if we can assist with your particular circumstances.
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