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Courtesy of Fisher Phillips
While new presidents are typically judged based on their actions in their first 100 days, the current Trump administration has moved at such a rapid speed that we think another recap is needed at the halfway point. Here’s your employer cheat sheet on Trump’s first 50 days.
DEI and Equal Opportunity Compliance
Affirmative Action and Federal Contract Compliance
Department of Labor + Workplace Safety
Employee Defection and Trade Secrets
Artificial Intelligence
Education
Conclusion
The Trump administration has showed no signs of slowing down, and we expect that to continue throughout the next 50 days and beyond.
A Texas federal court just struck down the FTC’s proposed ban on non-competition agreements on a nationwide basis mere weeks before it was set to take effect, meaning employers across the country can breathe a sigh of relief and continue to maintain non-competes as their state laws allow. While there is a slim chance the rule could be resurrected by a federal appeals court in the future, what’s for certain after the ruling on 8/20/24 is that you will not have to comply with the rule by September 4 as originally scheduled. What do you need to know about this significant development and what should you do now that the landscape has shifted once again?
What Happened?
A Texas employer, the U.S. Chamber of Commerce, and a handful of other business organizations sued the Federal Trade Commission (FTC) in federal court seeking an order blocking the non-compete rule from taking effect on September 4 as scheduled.
Judge Ada Brown from the Northern District of Texas initially agreed that the rule was an invalid exercise of the agency’s power on July 3, but only blocked the rule as it applied to the parties in the case and left open the question of whether the FTC could proceed with the ban. She later promised to issue a final ruling on the matter by August 30.
Judge Deploys 2 Main Arguments to Kill Non-Compete Ban
The judge took a two-pronged attack to the FTC’s non-compete ban. Her first line of attack was ruling that the agency didn’t have the power to issue the rule because Congress only authorized it to issue procedural rules to address unfair methods of competition, not substantive rules. “The role of an administrative agency is to do as told by Congress, not to do what the agency thinks it should do,” she said.
Her second rebuke was concluding that the rule itself was “arbitrary and capricious” for the following reasons:
Rule Blocked for All Employers Across the Country
Most importantly for employers, Judge Brown concluded that her order setting aside the non-compete ban should apply to all employers across the country. As noted above, she originally just blocked the rule from taking effect for those parties that had filed suit in the Texas case. In fact, in a separate decision just a week or so after her July 3 limited ruling, she again declined to extend the preliminary injunction nationwide – leaving employers in a state of uncertainty as the days dwindled down towards the effective date.
Following Judge Brown’s ruling, a Pennsylvania court in a separate lawsuit declined a motion to block the rule, and a Florida court granted a limited injunction similar to the Texas court’s original order, leaving employers in doubt about whether the rule might be vacated prior to its September 4 effective date.
But this updated ruling put an end to all of that concern. Brown noted that federal law required her to “hold unlawful” and “set aside” the non-compete ban with nationwide effect. All parties in all judicial districts across the country are equally covered by the ruling, she said.
Post-Chevron Shockwaves
The decision is one of the first prominent cases to demonstrate the evolving power of courts to overrule agency actions now the Supreme Court has struck down the Chevron doctrine. For those unfamiliar, SCOTUS issued the groundbreaking Loper Bright ruling on June 28 tossing out a decades-old standard that had required courts to give substantial deference to agencies like the FTC.
The new standard? Courts should instead exercise their independent judgment when deciding whether an agency’s actions are proper exercises of power – essentially enabling courts to strike down agency rules more easily.
And this decision is a perfect example of how this new standard will be deployed by courts to significant effect. The first sentence of Judge Brown’s analysis section quotes the Supreme Court’s Loper Bright case, in fact, noting that the Administrative Procedure Act should serve “as a check upon administrators whose zeal might otherwise have carried them to excesses not contemplated in legislation creating their offices.”
What’s Next?
The FTC could try to breathe new life into the rule by filing an appeal of this decision in the coming weeks. It could also seek an emergency order from the appellate court that would cause the rule to take effect as scheduled.
However, any appeal would be heard by the notoriously business-friendly 5th Circuit Court of Appeals, where the odds of the rule being resurrected are slim. And the next step after that would be a potential visit to the Supreme Court, which has taken direct aim at the regulatory state in recent years and is likely a hostile environment for any attempt by the FTC to wield such power.
What Should You Do?