FTC retreats on noncompetes

In an anticipated reversal, the Federal Trade Commission (FTC) dropped its appeal in a case that enjoined a commission rule issued during the Biden administration banning noncompete clauses for most employees. The FTC left room for enforcement of the noncompete principle in individual cases by reaching a settlement with the employer, Properties of the Villages Inc., that freed the affected employees from the stringent noncompete agreements.

Two cases

The antipathy of current FTC Chair Andrew N. Ferguson toward the noncompete rule was well-known. At the time the commission issued the rule, under a Democratic majority, Ferguson publicly condemned it as being facially illegal and beyond the scope of the commission’s authority. He predicted the rule would not survive judicial scrutiny, a prediction that was borne out in two decided cases, one in Texas and another in Florida.

In the Texas case, after the district court enjoined the rule, the agency initially appealed the ruling, but once the FTC switched to a Republican majority, it asked that the appeal be delayed pending further review by the commission.