FOLLOW US

Rep. Matt Gaetz threw his support behind the Federal Trade Commission on Tuesday in a court battle over the agency's new rule banning employee noncompete clauses, arguing that Congress has repeatedly affirmed the commission's authority to make competition rules.

Gaetz, a Florida Republican who has praised the Biden administration's antitrust enforcement efforts, filed an amicus brief in Texas federal court supporting the FTC as it defends against a challenge of the rule from tax preparation company Ryan LLC and the U.S. Chamber of Commerce.

The brief argued that the rule barring the use of employment clauses preventing workers from moving to a competitor fits "squarely within" the statutory rulemaking authority granted by Congress to the commission over a century ago when it passed the FTC Act.

In a statement Tuesday, Gaetz said he believes noncompetes are a bipartisan issue and said his brief highlights that Congress thought hard about the role the FTC should play in helping "create a level playing field in the American economy."

"The FTC noncompete rule is a reasonable exercise of the FTC's delegated authorities and I believe it is helpful for American workers, such as those who were let go from their jobs due to workplace vaccine mandates and then doubly injured when they were prohibited from job hunting," Gaetz said.

While many Republicans still object to what they call a heavy governmental hand in regulatory enforcement, some prominent Republican lawmakers like Gaetz and Sen. J.D. Vance, R-Ohio, have praised the FTC for standing up to consolidation in big business and other antitrust issues.

In Tuesday's brief, Gaetz argued that the noncompete rule is the result of an "extensive economic and legal inquiry" into the harms caused by the clauses that included considering some 26,000 public comments. The brief also said the challenge of the rule is more than just an academic inquiry into the commission's authority because more than 30 million American workers are subject to noncompete clauses that reduce their wages by $30 billion each year.

"Just as our forebearers toward the end of the 19th century began to recognize that uncontrolled economic individualism had led to private restraints that tolerated neither individualism nor freedom, amicus similarly recognizes that noncompete agreements are often coercive private restraints masquerading as freedom of contract," the brief said.

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.

The suit from Ryan and the Chamber argues the FTC lacks express congressional approval to regulate noncompetes 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 pending motion in the case would pause the rule's slated September start date and block enforcement while the suit is pending. Labor groups, local lawmakers and others have thrown their support behind the commission, while nearly a dozen national and international trade associations were among those to support the challenge in amicus briefs last month.

The brief from Gaetz contended that Congress passed the FTC Act in 1914 due to concerns that the U.S. Supreme Court had eroded the nation's foundational antitrust law, the Sherman Act. The FTC Act created the commission and gave it the authority "to make rules and regulations for the purpose of carrying out the provisions" of the act.

The brief also argues that Congress had several opportunities to limit the commission's substantive rulemaking authority when passing laws that amended the FTC Act, including the Magnuson-Moss Act in 1975.

"Magnuson-Moss expanded the Commission's authority to issue rules prohibiting 'unfair or deceptive acts or practices,' subject to heightened procedural requirements, and left intact the Commission's authority to issue rules regarding 'unfair methods of competition,'" the brief said.

The commission's rulemaking power is not an open question, the brief said, and Congress did not intend for the issue to be litigated each time the agency tries to adopt or enforce a rule.

"In fact, it is precisely concern over judicial activism that gave rise to these, and other, delegations of authority to federal agencies," the brief said.

Representatives for the FTC and Ryan declined to comment Tuesday. Representatives for the Chamber did not respond to a request for comment.

Gaetz is represented by Andrew Kloster.

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 Texax.