August 2024 Volume 6

OPERATIONS & MANAGEMENT

Second (on July 3), the Northern District of Texas enjoined the application of the new rule effectively eliminating non-compete agreements, this one proffered by the Federal Trade Commission (FTC). Under this non compete rule, except in certain limited circumstances, an employer was prohib ited from entering into non-compete agree ments with employees and would have to rescind current ones as of the effective date. The FTC found support for this rule by saying that non-compete agreements were “unfair methods of competition.” The court disagreed that the agency had the authority to make this call and create such a rule. The Court enjoined the rule – but again just for the Plaintiff in this case (and those parties who specifically intervened as plaintiffs). There was no specific finding as to all the other employers out there – except that the Court said it would issue a “merits dispo sition” presumably addressing the question more broadly on or before August 30, 2024. So, what happens next? For the “non

compete rule,” the District Court has said that it will make a “merits decision” by August 30 – before the September 4 date that the rule would take effect. And the initial decision coupled with the Loper direction to courts that they decide (and not defer) certainly point to the Court’s invali dating the rule for all employers. Similarly, for the FLSA rule, the Court set a schedule to have all materials on file to make a “merits decision” by September 19. While this Court has not specifically said that it will decide the issue by a date certain, I fully expect that we will have a decision before the January 1 salary increase. And, given the overall tone of the initial decision and the direction of Loper, the future of this rule also appears in question. But it won’t stop here. The Loper deci sion can (and will!) impact all agency rulemaking. Further, it specifically allows impacted parties – through courts – to chal lenge that rulemaking. For employers, this could be on the front end, e.g., filing a suit

like we see in the FLSA or non-compete rule to stop it from taking effect. I also antici pate using this as a defense on the back end if an employer is sued for non-compliance. Depending on your level of activism and/or risk tolerance, I can see employers making different choices in personnel issues. Of course, as always, this is not legal advice – please seek counsel if you have questions.

Johanna Fabrizio Parker Partner, Labor & Employment Benesch Friedlander Coplan & Aronoff LLP Phone: 216-363-4585 Email: JParker@beneschlaw.com

FIA MAGAZINE | AUGUST 2024 47