Two separate lawsuits have challenged the Federal Trade Commission’s ban on non-compete ‎provisions and agreements: Chamber Of Commerce Of The United States Of America et al. v. ‎Federal Trade Commission et al., Case No. 6:24cv148, filed in the District Court for the Eastern ‎District of Texas; and Ryan, LLC v. FTC, Case No. 3:24cv986, filed in the District Court for the ‎Northern District of Texas.‎

The Ryan, LLC case was filed one day before Chamber of Commerce. On May 3, 2024, the ‎Chamber Of Commerce case was stayed under the first-to-file rule, so the legal challenge to the ‎FTC’s non-compete rule will be litigated in the Ryan, LLC case. The plaintiffs in the Chamber of ‎Commerce case may seek to join or have their case consolidated with Ryan, LLC.‎

The plaintiffs in Ryan, LLC raise largely the same arguments asserted in the Chamber of ‎Commerce case. Specifically, the plaintiffs in Ryan, LLC argue:‎

• the FTC lacks authority under the FTC Act to issue substantive rules, as opposed ‎to procedural rules
• the FTC “lacks the authority to ban non-competes by declaring them an unfair ‎method of competition,” in part due to the sweeping, major reach of such a ‎question
• if the FTC Act is interpreted to authorize the agency to issue the rule here, it ‎would be an unconstitutional delegation of authority
• the FTC’s Commissioners lack constitutional authority to vote for the rule because ‎their statutory removal protections are incompatible with the President’s exercise ‎of his executive power
• the FTC “acted arbitrarily and capriciously,” in that the enforceability of non-‎compete clauses should be “determined on a case-by-case basis” under the rule of ‎reason because they can be a “mutually beneficial, negotiated term of ‎employment” ‎
• the FTC acted arbitrarily and capriciously in failing to sufficiently consider ‎alternative proposals
• the FTC acted contrary to law by retroactively invalidating non-compete clauses ‎without individualized consideration such as envisioned by the Fifth Amendment

Look for further updates from Schwabe as this case progresses.‎

This article summarizes aspects of the law and does not constitute legal advice. For legal ‎advice for ‎your situation, you should contact an attorney.‎