GOP-Led States Say Biden FTC Overstepped With Noncompete Ban

The Federal Trade Commission unlawfully intruded on states’ regulatory power by issuing a near-total ban on worker noncompete agreements, a group of 17 Republican-led states argued in a new court filing.

Led by the Florida attorney general’s office, the states urged the US Court of Appeals for the Eleventh Circuit to affirm a Florida federal judge’s decision that the FTC lacked clear congressional authorization to implement the ban.

“States have regulated noncompete clauses and contract law since the founding,” the states said Wednesday. “The federal government, in contrast, has never done so. This dramatic change from state to federal regulation requires a clear statement from Congress that does not exist.”

The friend-of-the-court brief came in a case the FTC is defending against Properties of the Villages Inc., a real estate firm in The Villages, Fla., that challenged the rule. The agency is also appealing at the Fifth Circuit a Texas judge’s August decision that blocked the rule from going into effect.

A leadership shakeup inside the agency raises doubts about whether that fight will continue. Republican Andrew Ferguson, who became the agency’s chair upon President Donald Trump’s inauguration, voted against the rule while serving as a commissioner.

GOP v. Democratic States

Arkansas, Georgia, Idaho, Indiana, Iowa, Louisiana, Mississippi, Montana, Nebraska, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, and West Virginia joined Florida on the brief.

Their filing came after a separate group of 17 Democratic-led states and Washington, D.C., in November filed a similar brief in support of the ban and its economic benefits.

Under former chair Lina Khan, the FTC argued the ban would boost worker wages and opportunities.

“The elected policymakers of most of those states disagree,” the Republican-led states said in their filing, noting just four states ban noncompete agreements outright.

States were the sole regulators of noncompetes before the FTC “invaded that field” with its rule passed in April 2024, they added.

Khan is still a commissioner but said she intends to depart the agency Jan. 31.

The federal district judge hearing the challenge from The Villages previously said the noncompete ban fell within the FTC’s wheelhouse.

But, he said, it failed to pass the Supreme Court’s “major questions” test, which requires regulators to have clear congressional authorization before acting on questions with major political or economic weight.

The FTC in November argued there’s “nothing extraordinary” about exercising its regulatory mandates and that the rule shouldn’t be subject to that test.

Properties of the Villages Inc. is represented by Covington & Burling LLP.

The case is Properties of the Villages, Inc. v. FTC, 11th Cir., 1/22/25.