A US federal judge in Florida ruled on Thursday that the Federal Trade Commission’s (FTC) impending ban on non-compete clauses in employment contracts is likely unlawful and enjoined it. However, the judge only stopped the ban from going into effect against the plaintiff, a real estate broker, rather than blocking the FTC from enforcing the ban nationwide.
The plaintiff had argued that the FTC could not make substantive rules about what constitutes unfair methods of competition. Still, even if it could, this rule would exceed the agency’s powers and violate the Major Questions Doctrine.
Reading his opinion from the bench, Judge Timothy J. Corrigan explained that the FTC can make some substantive rules but agreed that the ban violates the Major Questions Doctrine. The judge noted that the ban has a “huge economic impact” and that regulation of non-compete clauses has historically been reserved to state governments. In such a scenario, the judge continued, Congress must have authorized the agency to issue such rules. The judge concluded that the relevant statute here, Section 6(g) of the FTC Act, “falls short” of doing so.
In July, a federal judge in Texas similarly blocked the FTC from enforcing the rule against a group of plaintiffs, which included the US Chamber of Commerce. The judge concluded that “Congress vested the Commission with the power to promulgate substantive rules regarding only unfair or deceptive acts or practices, not unfair methods of competition.”
In a later win for the FTC, however, a federal judge in Pennsylvania ruled that the non-compete ban is lawful. According to the judge, the FTC does have substantive rule-making authority and “acted within its authority” in announcing this ban. That decision does not affect the other two cases but does suggest that appellate courts might differ on the issue.
The three decisions come in the wake of Loper Bright Enterprises v. Raimondo, a case in which the US Supreme Court overruled Chevron U.S.A. v. Natural Resources Defense Council. In doing so, the court curtailed the executive branch’s power by limiting the deference that courts give agencies on questions of their statutory authority.
