Florida’s Federal Court Issues a Ruling on the FTC Ban Limited SOLELY to the Florida Real Estate Plaintiffs In That Case

The battle lines have been drawn over the Federal Trade Commission’s (“FTC”) near-total ban on non-competition agreements nationwide (the “Ban”), and the states are continuing to choose their sides.

In the “anti-Ban” corner, we have Texas and – as of August 15, 2024 – Florida. 

In the “pro-Ban” corner, we have Pennsylvania, standing alone, but looking scrappy.

Now, let’s be clear at the outset: so far, the respective rulings of TX, FL, and PA have only applied to the specific parties involved in the individual cases before those specific courts. Even though Florida has sided with Texas in declaring that challenges against the Ban have a “substantial likelihood of prevailing on the merits,” nothing that the Texas or Florida courts ruled will have any impact on the Ban’s scheduled nationwide enactment on September 4, 2024. 

This sort of thing can quickly get confusing, even to legal scholars, so we’ll say this explicitly to avoid any misunderstandings: the FTC’s near-total ban on non-competition agreements nationwide is still scheduled to take effect on September 4, 2024, and nothing any court in any state has done so far will prevent or change that. 

That said, the fact that we now have a bona-fide circuit split in what is shaping up to be one of the most significant legal battles in the arena of labor and employment law this country has seen in decades is extremely significant. The Eastern District of Pennsylvania (“PA”) has just as much power as the Northern District of Texas (“TX”) or the Middle District of Florida (“FL”), so the fact that PA is in favor of the Ban means that – unlike similar challenges to administrative action in the past – a handful of unelected judges from TX cannot single-handedly shape what federal policy will look like for the next several years. 

If you’ll allow us just a moment to editorialize, no matter how you might feel about the Ban, surely we can all agree that giving a tiny panel of unelected individuals more power than the entire FTC smacks of being anti-democratic.  But we digress.

We must admit that we’re in uncharted territory here. For the past several years, ambitious administrative actions like the Ban have been safe to ignore outright, with legal scholars secure in the absolute certainty that TX would declare any such actions unconstitutional, and the responsible Agency would – after issuing a few half-hearted promises to appeal the ruling – slink back to D.C. in defeat. It was all just a sad little show the agencies felt compelled to put on every few years to support their need to exist, and likely to justify their budgets. 

But in just these past two years, something changed: administrative agencies started getting things done. From the previously mostly irrelevant National Labor Relations Board (“NLRB”) to the Department of Labor (“DOL”), to the U.S. Department of Homeland Security (“DHS”), and now to the FTC, federal agencies have been issuing dramatic new rules at an unprecedent rate of both speed and success. By way of example: the NLRB successfully prohibited making the monetary conditions of non-management employee severance/settlement agreements confidential, as well as prohibiting banning employee cell phone use; the DOL successfully raised the salary thresholds for white collar exemptions from $35,568 per year to $43,888 per year, with another increase to $58,656 per year set to take effect on January 1, 2025; the DHS – after years of lobbying (read: pleading) from every employer in America – successfully made remote employment eligibility verification permanently legal, spurring the new “E-Verify” standard taking hold nationwide; and the FTC is on the verge of successfully altering the post-employment relationship between employers and employees for the conceivable future.

It's hard enough cataloguing the myriads of factors that went into this massive shift, let alone boiling things down to a single, simple explanation… but let’s try anyway, because this is a blawg, not a court filing, so “it sure feels like” is good enough for us: it sure feels like the COVID-19 pandemic ushered in a new era of labor and employment in America. For the first time since union membership began plummeting in the mid 1960’s, the scales have tipped – albeit ever-so-slightly – nationally in favor of employees over employers, and ambitious administrative agencies are seizing this opportunity to gain as much ground as they can before the pendulum inevitably swings back. 

So, what does this mean for your business? As of right now, the safest course of action is to proceed as if the Ban will take effect on schedule on September 4, 2024. While TX and FL have both made their stances against the Ban clear, the fact that PA has chosen to champion the other side means that, whatever the ultimate disposition of the Ban is, it’s not going to quietly disappear like so many other administrative agency actions in the recent past. Even if the Ban does fail, it will likely be after a prolonged, public legal battle, during which the Ban may be in place.  The right move is to proceed with your planning using the assumption that your business will be subject to the Ban, if only temporarily.  Stay tuned for more information we will be sending as to the steps you’ll need to take in the next week to advise as to the status of any non-compete agreements you currently have in place.  A LOT can happen in a week these days!