Texas Court Rules FTC Non-Compete Ban Unenforceable

On August 20, a federal district judge in the Northern District of Texas officially set aside the FTC's non-compete ban as unlawful, and exceeding the FTC's authority, in Ryan LLC v. Federal Trade Commission.  The judge found the rule to be unconstitutional and arbitrary and capricious in violation of the Administrative Procedures Act.  Just a few days before, another federal court ruled that the FTC's sweeping ban on the use of non-compete agreements is unenforceable.  In Properties of the Villages, Inc. v. Federal Trade Commission, the judge was careful to note that it was only prohibiting the FTC from enforcing the ban against the plaintiff.  The Florida judge relied on the so-called major questions doctrine, which states that when an agency is making an economically and politically significant decision, it must point to specific Congressional authorization for the power it is exercising.  Meanwhile, a Pennsylvania district court refused to grant an injunction.  Absent the nationwide ban, the FTC rule would have gone into effect September 4.  It is, however, likely that the FTC will appeal, setting the stage for potential Supreme Court review.  For more information on the use of non-compete agreements, visit Tax Facts Online. Read More: Link to Q3640.5.  Note: Q is updated.