A US District Court granted a preliminary injunction to the parties that brought a lawsuit challenging the noncompete rule issued by the Federal Trade Commission. The US Supreme Court expanded the time that challenges against a rule issued by a federal agency can be brought. A House committee approved a bill disapproving the fiduciary rule that was finalized by the Department of Labor. A Senate committee approved a bill that would invalidate pre-dispute arbitration agreements in age discrimination cases.
District Court Grants Preliminary Injunction Blocking FTC Noncompete Rule – The United States District Court for the Northern District of Texas issued a preliminary injunction blocking the noncompete rule finalized by the Federal Trade Commission (FTC). In granting the preliminary injunction in the case of Ryan LLC v. Federal Trade Commission, the District Court stated that it will issue a final decision on the merits of the case by August 30th, which is before the September 4th effective date of the FTC rule. The District Court concluded that the plaintiffs were likely to succeed on the merits of the lawsuit since the noncompete rule exceeded the FTC’s statutory authority, is unconstitutional as well as being arbitrary and capricious. The District Court limited the preliminary injunction to the parties involved in this case which include Ryan LLC, Chamber of Commerce of the United States, Business Roundtable, Texas Association of Business and Longview Chamber of Commerce.
The FTC estimates that 30 million workers are subject to noncompete agreements. The rule prohibits employers from entering into new noncompete agreements with workers as of the September 4th effective date. The rule prohibits employers from enforcing existing noncompete agreements with the exception of senior executives, which it defines as those working in a policy making position who earn at least $151,164/year. For senior executives, the rule only prohibits noncompete agreements entered into after September 4th. A worker would include an employee, independent contractor, intern, volunteer, or apprentice.
There are two additional lawsuits challenging the FTC noncompete rule that have been filed in US District Courts. The US District Court for the Eastern District of Pennsylvania will be ruling on a preliminary injunction motion in the case of ATS Tree Services, LLC v. FTC. The US District Court for the Middle District of Florida will be considering a motion seeking a stay of the September 4th effective date and a preliminary injunction in the case of Properties of the Villages v. FTC.
Supreme Court Expands Time to Challenge Agency Rule – In a 6 – 3 decision, the United States Supreme Court ruled that the six year statute of limitations to challenge a rule issued by a federal agency begins to run when a plaintiff is injured by the action of the federal agency. Justice Barrett who wrote the majority opinion in Corner Post, Inc. v. Board of Governors of the Federal Reserve System concluded that a “claim does not accrue…until the plaintiff is injured by final agency action.”
Corner Post is a truck stop and convenience store located in North Dakota that began operations in 2018. Corner Post accepts debit cards as a form of payment. Every transaction using a debit card requires the merchant to pay an interchange fee to the bank that issued the card. In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act that directed the Federal Reserve Board to set standards for assessing whether the amount of any interchange transaction fee is reasonable. The Federal Reserve Board issued a rule in 2011 setting a maximum interchange transaction fee.
Corner Post brought this action claiming that the Federal Reserve Board maximum interchange transaction fee rule allowed higher fees than the statute allows. The District Court and the Court of Appeals for the Eighth Circuit dismissed the case since the statute of limitations began to run when the agency published the rule. Due to a split among the judicial circuits, the Supreme Court agreed to review this case. The majority noted that the “6-year limitations period began in 2011, when the Board published Regulation II, and expired in 2017, before Corner Post swiped its first debit card.”
The Supreme Court majority observed that the statute covering the time to bring an action against the United States, found at 28 U.S.C. 2401(a) states, “[E]very civil action commenced against the United States shall be barred unless the complaint is filed within six years after the right of action first accrues.” Justice Barrett stated, “when Congress used the phrase ‘right of action first accrues’ in §2401(a), it was well understood that a claim does not ‘accrue’ as soon as the defendant acts, but only after the plaintiff suffers the injury required to press her claim in court.”
DOL Fiduciary Rule Disapproval Resolution Advances – The House Committee on Education and the Workforce approved a joint resolution (H.J. Res 142) that would overturn the fiduciary rule finalized by the Department of Labor. The resolution will be considered next by the full House of Representatives. Additionally, the House Committee on Appropriations approved an amendment to the fiscal year 2025 funding bill for the Department of Labor prohibiting the spending of any funds implementing the fiduciary rule.
The final rule issued by the Department of Labor is scheduled to take effect on September 23rd. According to the Department of Labor, the rule updates the definition of an investment fiduciary to ensure that they “adhere to high standards of care and loyalty when they recommend investments and avoid recommendations that favor the investment advice providers’ interests – financial or otherwise – at the retirement savers’ expense.” Nine trade associations have filed a lawsuit, American Council of Life Insurers v. U.S. Department of Labor in the United States District Court for the Northern District of Texas challenging the fiduciary rule.
Committee Approves Protecting Older Americans Bill – The Senate Committee on Judiciary approved bipartisan legislation (S. 1979) that would make pre-dispute arbitration agreements or waivers invalid and unenforceable in age discrimination disputes. The primary sponsor is Senator Kirsten Gillibrand (D-NY) along with 13 cosponsors. Senator Gillibrand stated, “Employers should no longer be able to use forced arbitration clauses to hide discriminatory conduct, and the Protecting Older Americans Act would end that practice.”
The bill will be considered next by the Senate. A companion bill (H.R. 4120) has been introduced in the House of Representatives by Representative Nancy Mace (R-SC) and has been referred to the House Committee on the Judiciary.
Neil Reichenberg is the former executive director of the International Public Management Association for Human Resources. He is an attorney, a frequent writer and speaker on public policy and human resource issues and was an adjunct faculty member at George Mason University. For questions or additional information, contact Reichenberg at neilreichenberg@yahoo.com.