In April of this year, the Federal Trade Commission (FTC) issued a sweeping rule that would ban noncompete agreements, upending decades – if not centuries – of business practices that protect confidential information and competition. Just this week, a federal judge struck down the FTC’s attempt to unilaterally expand its rulemaking authority, making clear that “The role of an administrative agency is to do as told by Congress, not to do what the agency thinks it should do.”
At the Texas Association of Business (TAB), we are working with our members and local Chamber partners to lead the charge in fighting back against this egregious overreach of federal power. The implications of this rule would have serious consequences for businesses across the state and nationwide.
After the rule was issued, TAB, alongside the U.S. Chamber of Commerce and the Longview Chamber of Commerce, took a stand against this blatant regulatory abuse of power by filing a lawsuit in the U.S. District Court for the Eastern District of Texas. We later intervened in a case filed by TAB member company Ryan, LLC – ongoing in the U.S. District Court for the Northern District of Texas – challenging the FTC’s authority to implement such a broad and impactful regulation. Alongside our partner Kelly Hall, President and CEO of the Longview Chamber of Commerce, TAB issued a joint statement underscoring the gravity of the situation:
“We stand firm in our commitment to safeguarding the interests of businesses and employees alike, and the FTC’s recent power grab threatens to disrupt countless existing agreements, hinder businesses' ability to protect confidential information, and bring serious harm to competition. The FTC lacks the statutory authority to issue such broad regulations, and the Commission’s noncompete rule represents an arbitrary exercise of bureaucratic power. We urge the Court to review and set aside the rule, as it is both unlawful and will result in cascading adverse impacts on businesses and workers in Texas and nationwide.”
The Texas business community has every reason to be concerned. The noncompete ban not only jeopardizes existing agreements that protect trade secrets and proprietary information but also upends long-standing contractual relationships that have been recognized as lawful and beneficial to the public interest.
The dissenting voices within the FTC itself highlight the problematic nature of the rule. Commissioners Melissa Holyoak and Andrew Ferguson penned opposing statements upon the rule’s passage. Commissioner Holyoak argued that “the FTC Act’s text and structure do not support competition rulemaking authority,” while Commissioner Ferguson pointed out that the FTC fell “woefully short of satisfying [its] requirement” according to a seemingly random and unreasonable standard.
The decision from U.S. District Judge Ada Brown handed down this week validates these concerns and provides a glimmer of hope for businesses seeking to protect their rights. Her decision is unsurprising, given that the Court previously found that the plaintiffs would suffer irreversible harm if the noncompete ban was not enjoined. At that time, the court found it “evident that if the requested injunctive relief is not granted, the injury to both Plaintiffs and the public interest would be great” as the Noncompete Ban “makes unenforceable long-standing contractual agreements that have been judicially recognized as lawful and beneficial to the public interest.”
In response to this week’s ruling, Ryan, LLC CEO Brint Ryan made clear that the FTC’s attempted maneuver to undermine longstanding business practices are not isolated:
“The continuing overreach and overregulation from the federal government jeopardizes America’s economic liberty and diminishes the opportunity our country provides for all of us.”
As this legal battle continues, TAB remains committed to protecting the interests of Texas businesses. The fight against the FTC’s overreach is not just about noncompete agreements; it’s about ensuring that federal agencies do not exceed their statutory authority and that businesses can operate without the threat of capricious and harmful regulations.
When the FTC acts without Congressional authority, it’s critical for the courts to intervene, as they did in this case. The greatest threat to the Texas economy is reckless regulatory overreach in Washington, D.C.
We commend Ryan, LLC and all other Texas businesses that have stood up against this unjust rule. TAB will continue to fight for a fair and balanced regulatory environment in the Lone Star State that allows both companies and citizens to thrive and grow, free from undue federal interference.
- Glenn Hamer, President & CEO, Texas Association of Business
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