Khan-Led FTC Makes Final Court Plea for Worker Noncompete Ban

The Federal Trade Commission pushed a US appeals court to overturn a ruling that prevented a near-total ban on worker noncompetes from going into effect, in a final plea for the regulation before an overhaul in agency leadership.

A Texas federal court was wrong in holding that the commission overstepped its legal authority in issuing a rule banning noncompete agreements, the FTC said in a Thursday brief in the US Court of Appeals for the Fifth Circuit.

LISTEN: UnCommon Law’s 5-Part Podcast Series on the FTC’s Noncompete Ban

“The district court compounded its errors by entering a universal vacatur of the rule,” the agency added, arguing nothing in the case warranted relief beyond the specific parties that brought the challenge.

The brief was submitted just weeks before President-elect Donald Trump returns to the White House, which will usher in a change atop the FTC. Andrew Ferguson, a Republican commissioner whom Trump tapped to replace current chair Lina Khan, dissented when the FTC issued the rule in April 2024, raising questions about the litigation’s future.

The FTC is also fighting, at the Eleventh Circuit, a preliminary Florida court decision that said under the Supreme Court’s “major questions” doctrine, the FTC lacked clear congressional authorization to adopt the rule.

The Justice Department is representing the agency in both appeals.

The Khan-led FTC has argued the noncompete ban falls squarely within its mandate and that it would boost employment opportunities and wages for a wide swath of Americans. About 20% of the workforce, or roughly 30 million people, are subject to noncompete contracts that restrict their ability to move jobs, according to FTC estimates.

Judge Ada Brown of the US District Court for the Northern District of Texas “set aside” the rule on a nationwide basis after rule challenges from the tax services firm Ryan LLC and business groups, including the Chamber of Commerce.

The FTC said in Thursday’s brief that Brown misread the text of the FTC Act and “improperly disregarded” the evidence it put forth to support its rule. The agency also took issue with Brown’s sweeping order.

“Had the district court considered the relevant constitutional and equitable principles, it would have been a clear abuse of discretion to conclude that universal vacatur was justified, " the agency said.

The Chamber of Commerce and Ryan LLC, the Texas-based tax firm, have been represented by law firms including Gibson Dunn & Crutcher LLP and Sullivan & Cromwell LLP. Lawyers who spearheaded the case include Eugene Scalia, a former US Labor Secretary during Trump’s first administration.

The case is Ryan LLC v. FTC, 5th Cir., 24-10951, 1/2/25.