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.
