The Federal Trade Commission has appealed a federal court ruling blocking its ban on most noncompete agreements.
The FTC filed a notice to appeal on Oct. 18, taking the case to the U.S. Court of Appeals for the 5th Circuit. Attorneys ultimately expect the Supreme Court to review the issue as several other similar lawsuits over the ban wind their way through the courts.
Related: Employers await FTC's next move on noncompete clauses
Weeks before the commission’s final rule outlawing contract clauses that restrict employees from working for a rival organization was set to go into effect, Judge Ada Brown struck down the regulation. The agency did not have the authority to issue an “unreasonably overbroad” rule, the U.S. District Court for the Northern District of Texas judge wrote in an Aug. 20 decision.
Brown’s decision eliminated the regulation on a nationwide basis as requested by the U.S. Chamber of Commerce and tax firm Ryan LLC. The organizations had filed the lawsuit a day after the agency voted to finalize the rule, which would prevent employers from issuing noncompete agreements for new hires and enforcing them in existing contracts, except for senior executives.
The FTC's appeal to the 5th Circuit is the agency's latest move to revive the regulation.
In September, the commission appealed another ruling involving the noncompete ban by the U.S. District Court for the Middle District of Florida. The Florida court granted a preliminary injunction on Aug. 15, siding with a Florida retirement community called the Villages.
Judge Timothy Corrigan ruled that the FTC must have clear congressional authorization to issue such a broad regulation. The case before the U.S. Court of Appeals for the 11th Circuit is pending.
However, one district court came to a different conclusion.
The U.S. District Court for the Eastern District of Pennsylvania found that the commission’s noncompete ban was “within its authority under the [FTC] Act in designating all non-compete clauses as ‘unfair methods of competition.’” ATS Tree Services, which filed the complaint on April 25, dropped its legal challenge this month after the Pennsylvania court denied its bid to put the case on hold.