Employee Survival Guide® - 2025 Update on Federal Trade Commission Ban on Noncompete Agreements

Episode Date: March 8, 2025

Comment on the Show by Sending Mark a Text Message.I am tracking the developments of the legal case of Ryan LLC v. Federal Trade Commission, 5th Circuit Court of Appeals case, 24-10951.  This episode is part of my initiative to provide access to important court decisions  impacting employees in an easy to understand conversational format using AI.  The speakers in the episode are AI generated and frankly sound great to listen to.  Enjoy!A heated battle is unfolding over the Federal Trade Commission's ambitious attempt to ban non-compete agreements nationwide—a move that would directly impact an estimated 30 million American workers and potentially reshape the entire employment landscape.At stake is the fundamental balance between worker mobility and business protection. The FTC presents compelling evidence that non-competes suppress wages, stifle innovation, and restrict career advancement. They highlight cases like a software engineer whose promising app idea remained undeveloped for two years due to restrictive post-employment clauses. Their mountain of economic studies and worker testimonials paints these agreements as harmful shackles on both individual opportunity and broader economic growth.Meanwhile, the Chamber of Commerce and affected businesses are fighting back fiercely, arguing the FTC has dramatically overstepped its authority. They've invoked the "major questions doctrine," essentially claiming that such sweeping economic regulation requires explicit congressional approval. Companies like Ryan LLC contend that without non-competes, they face existential threats from employee poaching and client theft after investing substantially in specialized training. The constitutional questions raised go far beyond employment contracts to the very heart of regulatory power in America.The case has already seen significant legal developments, with a district court temporarily halting implementation through a nationwide injunction. As this battle potentially heads toward the Supreme Court, the implications extend beyond non-competes to fundamental questions about agency authority and the separation of powers. Whether you've personally signed a non-compete or not, this landmark case will likely reshape how regulations are crafted and enforced across industries for decades to come. What's your experience with non-competes, and do you think they protect legitimate business interests or unfairly restrict worker freedom?  If you enjoyed this episode of the Employee Survival Guide please like us on Facebook, Twitter and LinkedIn. We would really appreciate if you could leave a review of this podcast on your favorite podcast player such as Apple Podcasts. Leaving a review will inform other listeners you found the content on this podcast is important in the area of employment law in the United States. For more information, please contact our employment attorneys at Carey & Associates, P.C. at 203-255-4150, www.capclaw.com.Disclaimer: For educational use only, not intended to be legal advice.

Hey, it's Mark here and welcome to the next edition of the Employee Survival Guide where I tell you, as always, what your employer does definitely not want you to know about and a lot more. All right. So, you've really buried us in paperwork this time. There's like a whole stack of legal briefs and documents, all about the FTC's attempt to ban non-competes. Yeah.

It looks like we've got briefs from the FTC themselves, obviously pushback from the Chamber of Commerce, and even a statement from a company called Ryan LLC, who seems to be right in the middle of it all. Yes. Are you ready to dive into this one? Oh, absolutely. And it's a really interesting time

to be looking at this issue. You know, this is not just some kind of legal technicality here. The FTC is really aiming to fundamentally change the rules of the game for an estimated 30 million workers across all sorts of industries. Yeah, that is a huge number of people. It is.

So maybe just to get our listeners up to speed, could you quickly explain exactly what the FTC is trying to do with this non-compete rule? Sure, so essentially they're trying to make it illegal for companies to use non-compete agreements in almost any situation. So, you know, those clauses that you see in contracts that say like, if you leave this job,

you can't go work for a competitor for, you know, six months or a year, whatever it is. Yeah. Poof, gone. Wow. At least that's the FTC's goal. That's pretty sweeping. It is.

No wonder everybody's lawyering up. Yeah. So let's start with the FTC side of things. What's the main thrust of their argument here? Well, they're really coming out swinging. They're arguing that non-competes are inherently unfair methods of competition, which are illegal under the FTC Act. And they're not just going

after specific companies that are using them in a bad way or whatever. They're really saying that the very existence of these agreements is harmful to workers and stifles the entire economy. Okay. But how are they backing that up? Like, do they have any specific examples of this? Yeah, absolutely. So, for example, in their brief, they talk about the case of the software engineer who was bound by a non-compete after leaving his job.

Oh, really? And he had, you know, this great idea for a new app, but he couldn't develop it for two years because of the agreement. Wow. And, you know, FTC argues that this kind of situation is preventing innovation across all sorts of different industries.

So it's not even just about protecting workers from some kind of unfair contract. They're really saying that these agreements are holding back progress in a way. Exactly, yeah. And they also claim that non-competes suppress wages. By limiting workers' options, you know, makes it harder for them to negotiate for better pay and benefits if they can't, you know, easily go work for a competitor.

Yeah, thanks, Anne. And they also argue that these agreements discourage companies from investing in training for their employees. Okay, how so? Well, because they're afraid that the employees will just, you know, take those skills and go to a competitor, right? Yeah, right. So it's kind of a lose-lose situation.

Yeah, it sounds like they're kind of painting this picture of like a ripple effect where, you know, these agreements are impacting everything from, you know, individual salaries to like the competitiveness of whole industries. That's their core argument, yeah. And they're really bringing like a mountain of evidence to support it. They've got economic studies, they've got public comments from workers and businesses and you know their own internal analyses Wow, they're really trying to demonstrate that this is a you know, carefully considered conclusion and not just some kind of knee-jerk reaction Yeah, but obviously not everyone is buying it. The Chamber of Commerce for one is pushing back pretty hard

Oh, yeah, definitely their brief comes out with guns blazing. Okay Obviously not everyone is buying it. The Chamber of Commerce, for one, is pushing back pretty hard. Oh yeah, definitely. Their brief comes out with guns blazing. They basically say that the FTC is massively overstepping its authority. They argue that the FTC Act doesn't actually give the agency the power to issue a blanket ban on a business practice that's been around for so long. So it's kind of a power struggle then, like they're saying that the FTC is trying to act like Congress, you know, making new laws instead of just enforcing the existing ones.

That's really the heart of their argument, yeah. They're calling this a classic major questions doctrine case. And this doctrine basically says that, you know, when an agency is trying to regulate something that has like huge economic and political implications. They need clear direction from Congress to do so. And the chamber is arguing that Congress never gave the FTC this kind of power over non-competes. So their argument really hinges on like the scope of the FTC's authority and whether they're exceeding it with this rule. Right. Right.

Okay, what about Ryan LLC? I mean, they're coming at this from kind of a more practical business-oriented perspective. Exactly. Yeah. They're a tax consulting firm, and their brief basically argues that banning non-competes would be like a direct threat to their business. Oh, wow. They say that they rely on these agreements to protect their trade secrets and client

relationships, which they've built up over many years. So for them, it's really about the potential for immediate harm. They're imagining employees walking out the door and taking clients with them to a competitor. Exactly. Yeah. And they argue that without non-competes, they'd constantly be honorable to poaching, and they wouldn't be able to invest as much in specialized training

for their employees, because what's the point if they're just gonna leave? So they're basically saying that this rule would throw their whole industry into chaos. Wow. Yeah. It's interesting how they're highlighting that tension between protecting businesses on the one hand, and then fostering a competitive market that benefits businesses on the one hand and then fostering

a competitive market that benefits everyone on the other hand. Yeah. It's a key philosophical question at the heart of this whole debate. And it absolutely gets even more complicated when you start to look at those constitutional concerns that the Chamber of Commerce is raising. Yeah. They're not just saying the FTC is overreaching. They're actually kind of questioning the whole structure of the agency and whether it even allows for this kind of power. Exactly. And with limited presidential oversight, is that even constitutional?

Yeah. So hold on. We're talking about like a potential constitutional crisis over non-compete agreements here? I mean, that seems like a pretty big leap. Well, it might seem like a stretch at first, but it really does get to the core of how our government is designed. Yeah, okay. The opposition is basically arguing

that the FPC is acting like a mini-Congress. You know, they're unilaterally making major economic policy without any of the checks and balances that the Constitution requires. And they're saying that, you know, this kind of power grab upsets the separation of powers, and it could have implications far beyond just this one rule about non-competes. That's a pretty heady argument, but it sounds like the FTC is prepared to defend their position.

I mean, they obviously think they're on solid legal ground. Oh, yeah, definitely. And a lot of it hinges on their interpretation of the word prevent in the FDC Act. There is basically saying that prevent gives them broad authority to regulate entire industries proactively. You know, they don't have to wait for someone to break the law. They can step in and prevent the harm from happening in the first place. So it all comes down to like one word.

It's amazing how these like tiny details can become like these huge battlegrounds in legal cases. Absolutely. It's like they're trying to decipher some kind of secret code, you know, right, where each side is trying to unlock the you know, the true meaning hidden within the language of the law. Yeah. And, and actually speaking of code, another interesting point the Chamber of Commerce brings up is

that Congress specifically granted the FTC rulemaking power for unfair or deceptive practices. But they were totally silent on unfair methods of competition. So they're saying, like, if Congress wanted the FTC to have this power, they would have written it down explicitly. Exactly. It's a classic argument, you know, statutory interpretation. The opposition is basically saying that, you know, Congress knew what it was doing, and they chose to give the FTC, you know, limited authority in this particular area.

So we've got this back and forth over, you know, the FTC's authority and how to interpret the law. But what about the evidence itself? I mean, is the FTC actually proving that non-competes are always harmful? Well, that's another major point of contention. You know, the FTC cites all these studies showing that non-competes suppress wages and stifle innovation. But the opposition points out that a lot of those studies are really focused on specific states. Right. Not necessarily the nationwide impact that a ban would have. not necessarily the nationwide impact that a ban would have. So are they saying that the FTC's evidence is kind of like not representative enough to justify such a, you know,

sweeping rules, like trying to predict the weather for the whole country based on like a couple of weather stations? Yeah, that's a good analogy. The Chamber of Commerce is arguing that, you know, the FTC is overgeneralizing from limited data and that a nationwide ban could have all these unintended consequences. Yeah that those state-level studies just don't capture Yeah, okay. Well, what about the potential costs of this rule? I mean, we've heard Ryan LLC's concerns about losing trade secrets and clients, but does the chamber make any broader economic arguments? Oh, yeah, they they claim that the FTC's cost-benefit analysis is like Totally incomplete. Okay and ignores and ignores all these significant downsides.

For one thing, they argue that banning non-competes could actually discourage companies from investing in training for their employees. Oh, interesting. Because there's no guarantee that those employees will actually stick around to use those skills. So instead of protecting workers, it could kind of backfire and make them like less desirable hires. Yeah. It's kind of a weird twist, right?

Yeah. And they also raise concerns about, you know, increased litigation, even if it's a different kind of litigation than we have now. They argue that without, you know, these clear non-compete agreements, companies might be more likely to sue each other over trade secret theft or unfair competition, you know. So you could end up with even more legal battles and uncertainty. It sounds like they're saying the FTC is trying to solve one problem, but they might be creating a whole bunch of new ones in the process. Right, and you know they argued that all of these costs could

ultimately trickle down to consumers in the form of higher prices. Oh, okay. You know, their argument is that when businesses face more uncertainty and more risk, those costs often get passed along. So the Chamber of Commerce is painting this picture of all these unintended consequences, less investment, more lawsuits, and potentially higher prices for consumers. Great. It's a pretty stark contrast to the FTC's vision

of a more competitive and dynamic economy. But this whole debate has really got me thinking about my own experiences. Oh yeah. What comes to mind? Well, I've signed a few non-competes in my time, and honestly I always felt kind of trapped by them. It's like even if you're unhappy in a job, the thought of being legally barred from working in your field for a year or more, that's pretty daunting. Right.

It definitely makes you think twice about leaving, even if it's the right move for you. Yeah, that's a really important point. That psychological impact of non-competes is something that the FTC really emphasizes in their brief. Okay. They argue that these agreements create this chilling effect on worker mobility. It discourages people from even exploring new opportunities. And that makes sense, right? If you're constantly worried about legal repercussions, you're

less likely to take risks or start your own business or even just negotiate for better pay at a different company. Exactly. The FTC argues that this fear factor ultimately hurts innovation and economic growth. They want to empower workers to pursue their best interests without being shackled by these overly restrictive contracts. But on the flip side, I can also kind of see the argument for businesses wanting

to protect their investments. Like if a company spends a lot of time and money training an employee, it seems kind of fair that they'd want some assurance that those skills won't immediately be used against them by a competitor. Yeah, that's really the heart of the debate, finding that right balance between protecting businesses and fostering a competitive market that benefits everyone.

And that's where this case could have ripple effects far beyond non-competes. It's setting a precedent for how much power agencies like the FTC have to really reshape entire industries. So even if you're not directly affected by non-competes, this case could impact how other regulations are crafted and enforced in the future. Absolutely. Yeah, the outcome of this case could either embolden agencies to take a more assertive role, or it

could force them to kind of rein in their ambitions and defer more to Congress. It all depends on how the courts ultimately interpret the FTC's authority in this case. So where do things stand now? Like, is there any indication of which way this legal battle might swing? Well, it's already been kind of a roller coaster ride, you know. A district court actually sided with the Chamber of Commerce and issued a nationwide injunction against the rule.

So basically putting it on hold for now. So round one goes to the opposition. For now, yeah. But the FTC is appealing that decision. So this fight is far from over. Oh, wow. It could easily end up before the Supreme Court, which would obviously have massive implications for the balance of power between agencies and Congress. Yeah, a potential Supreme Court showdown.

I mean, that definitely raises the stakes. It sounds like this is a case worth watching closely no matter what industry you're in. Absolutely. You know, this deep dive has really revealed not just a legal battle over non-competes, but a deeper struggle over the very nature of regulatory power in America. You know, this case could have a lasting impact on how agencies operate and how businesses function for years to come. So what's the, you know, what's the main takeaway for our listener who's been wading through all these, you know, legal briefs with us?

What's the, so what for them? I think the key takeaway is that, you know, even these seemingly technical legal disputes can have really profound consequences for everyone, you know. This case is a reminder to pay attention to the regulations that are being debated out there. Right. And the potential impact that could have on your work, your industry, even the broader economy. It's also a reminder that, you know, there are often valid arguments on both sides of these really complex issues. It's not always a clear cut case of, you know, good versus bad. Right. And it's important to try to understand the nuances

and the trade-offs involved. Exactly, and as this story continues to unfold, I really encourage our listener to think critically about the arguments, the evidence, the implications for themselves and the world around them. Yeah, don't just accept what you hear at face value. Do your own research. Consider different perspectives and stay informed

about those potential ripple effects. That's what makes being quote unquote well informed, so rewarding it, really empowers you to make your own judgments and kind of navigate a complex world. And who knows, maybe one day you'll be sending us some source material for a deep dive. We're always up for a challenge.

All right, thanks for joining me for this deep dive. My pleasure. If you like the Employee Survival Guide, I'd really encourage you to leave a review. We try really hard to produce information to you that's informative, that's timely, that you can actually use and solve problems on your own and at your employment. So if you'd like to leave a review anywhere you listen to our podcast, please do so. And leave five stars because anything less than five is really not as good, right? I'll keep it up. I'll keep the standards up. I'll keep the information flowing at you. If you'd like to send me an email and ask me a question,

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