The Federal Trade Commission has received backing against a challenge of its new rule banning noncompete clauses, with a labor group, local lawmakers and others urging a Texas federal court not to prevent the rule from taking effect in September.

Supporters of the rule filed several amicus briefs Friday pushing back against a bid to stay the effective date and a bid for a preliminary injunction to prevent the rule's enforcement lodged by tax preparation company Ryan LLC and the U.S. Chamber of Commerce.

The Texas AFL-CIO, a state labor federation with 240,000 affiliated members, argued in its brief that the union group supports a speedy implementation of the rule because of the damaging effects that noncompete provisions have on Texas workers and because noncompetes undermine "the fundamental right to pursue a vocation of one's choosing."

"Working people rarely, if ever, have an opportunity to negotiate over the non-compete provisions in their employment contracts," the Texas AFL-CIO said Friday. "But these provisions strip them of the right to seek work where they would receive higher pay and better treatment and impede their professional growth and ability to channel their entrepreneurial spirit for the benefit of all of us."

By limiting economic freedom, the union group added, "non-competes leave hard-working Americans at the mercy of abusive employers, low wages, and poor working conditions."

An attorney for the Texas AFL-CIO, Nina DiSalvo of Towards Justice, told Law360 on Monday that powerful corporations should not be allowed to trample basic freedoms or to sidestep "a free and fair labor market."

"The Texas AFL-CIO brings ordinary people's voices to a complex litigation and reminds us that the issues at play here are actually very simple: the freedom of working people to pursue their careers, serve their clients, and start new businesses," DiSalvo said.

A group of 12 current and former local elected officials from Texas said in a brief on Friday that the FTC's "extensive analysis" shows that noncompete clauses undermine small-business creation, innovation, healthcare and wages.

"They do so despite less socially harmful means of protecting employers' legitimate interests, such as nondisclosure agreements and trade-secret protections," the group said. "The FTC's decision to adopt its rule was far from arbitrary or capricious — rather, it was a sensible response to a widespread practice."

An attorney for the elected officials, Darren P. Nicholson of Burns Charest LLP, told Law360 on Monday that the widespread misuse of noncompete agreements is bad for business, workers and for Texas.

"The FTC's rule banning the practice levels the playing field for employees and employers alike, and opens the door for thousands of small businesses," Nicholson said. "This rule makes the Texas economy stronger, and we were glad to partner with Public Rights Project and local officials across the state to urge the court to uphold it."

The FTC voted 3-2 along party lines to implement the new rule on April 23, deeming the use of noncompete clauses in employment contracts an unfair method of competition and thus unenforceable. Set to take effect in September, the rule bars noncompetes moving forward, and requires employers to tell current and former employees that existing agreements are no longer enforceable.

It includes a carveout for existing noncompetes covering senior executives, but the use of the clauses for those employees will be banned going forward.

Ryan LLC was the first to file a challenge of the rule, in the Northern District of Texas, the same day as the FTC's vote. The U.S. Chamber of Commerce intervened in the case last month after a court paused the Chamber's similar case and urged it to join Ryan's suit, because it was filed a day earlier.

FTC Noncompete Clauses

Nearly a dozen national and international trade associations threw their support behind the challenge in a joint amicus brief last month, as several other groups also filed individual briefs supporting the bid for a stay and a preliminary injunction.

The suit contends the FTC needs express congressional approval to regulate FTC noncompete clauses and cannot rely on its general authority against unfair methods of competition. The suit also argues that the retroactive effect raises constitutional concerns and that a categorical ban reflects an "arbitrary and capricious" exercise of the agency's powers since noncompetes need to be analyzed individually to see if they're unfair.

A group of administrative law scholars pushed back against the claims in an amicus brief on Friday, saying the FTC has a clear congressional mandate to promulgate unfair competition rules and said the "major questions doctrine" applies when there's a "mismatch" between an agency's action and its assigned mission.

"No such mismatch plausibly exists here: Congress has vested the commission with broad powers over unfair methods of competition, and no government agency could reasonably be expected to have greater expertise than the commission concerning non-compete agreements or unfair methods of competition generally," the scholars said.

An attorney for the scholars, Mark Samburg, senior counsel for the Democracy Forward Foundation, said in a statement on Monday that the "extremists" behind the rule challenge make a series of arguments that are fundamentally flawed and said the scholar's brief shows how "outlandish those challenges to this important protection for workers are."

"Non-compete clauses have kept millions of people trapped in jobs they may not want, and Democracy Forward is committed to defending workers' hard-fought freedoms," Samburg said.

A representative for the FTC declined to comment Monday. Representatives for Ryan and the Chamber did not respond to requests for comment.

The former and current elected officials are represented by Darren P. Nicholson, Warren T. Burns and Kyle Oxford of Burns Charest LLP, and Joshua A. Rosenthal and Eushrah Hossain of the Public Rights Project.

The administrative law scholars are represented by Mark Samburg and Robin F. Thurston of the Democracy Forward Foundation.

The Texas AFL-CIO is represented by David H. Seligman, Nina DiSalvo and Rachel W. Dempsey of Towards Justice, and Ashley E. Tremain of Tremain Artaza PLLC.

Ryan LLC is represented by Allyson N. Ho, Elizabeth A. Kiernan, Eugene Scalia, Amir C. Tayrani, Andrew G.I. Kilberg, Aaron Hauptman and Joshua R. Zuckerman of Gibson Dunn & Crutcher LLP, and Charles W. Fillmore and H. Dustin Fillmore III of The Fillmore Law Firm LLP.

The U.S. Chamber of Commerce, Business Roundtable, Texas Association of Business and Longview Chamber of Commerce are represented by Jordan L. Von Bokern and Tyler S. Badgley of the U.S. Chamber Litigation Center, Liz Dougherty of Business Roundtable, Jeffrey B. Wall and Judson O. Littleton of Sullivan & Cromwell LLP, and Robert L. Sayles and Boyce Holleman of Bradley Arant Boult Cummings LLP.

The FTC is represented by Madeline M. McMahon, Taisa Goodnature, Rachael Westmoreland and Arjun Mody of the U.S. Department of Justice's Civil Division.

The case is Ryan LLC et al. v. Federal Trade Commission, case number 3:24-cv-00986, in the U.S. District Court for the Northern District of Texas.