The United States District Court for the Eastern District of Pennsylvania decided that the Federal Trade Commission (FTC) had statutory authority to issue a rule limiting the use of noncompete rules. A House of Representatives Subcommittee held an oversight hearing on the Occupational Safety and Health Administration (OSHA). The National Labor Relations Board (NLRB) withdrew its appeal of its joint employer rule. Legislation has been introduced in Congress to overturn a recent United States Supreme Court decision to reinstate the requirement that federal courts grant deference to federal agencies when reviewing challenges to regulations.
District Court Upholds FTC Noncompete Rule – The United States District Court for the Eastern District of Pennsylvania ruled that the Federal Trade Commission (FTC) has statutory authority to issue an employee noncompete rule. In the case, ATS Tree Services LLC v. Federal Trade Commission, the District Court concluded “When taken in the context of the goal of the Act and the FTC’s purpose, the Court finds it clear that the FTC is empowered to make both procedural and substantive rules as is necessary to prevent unfair methods of competition.”
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 prevents 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.
ATS is a tree care company with twelve employees and requires its employees to sign non-compete agreements, prohibiting them from working for one year for direct competitors following separation from ATS. The company alleged that it needed the noncompete agreements since it would lose its investment in the specialized training it provides to all of its employees. ATS filed this lawsuit claiming it will be irreparably harmed if the FTC’s Final Rule on non-compete clauses is permitted to go into effect and that the FTC lacked the authority to issue this rule.
The District Court found that ATS failed to establish irreparable harm and was not entitled to a preliminary injunction. The District Court believed that ATS did not provide any evidence that its employees would leave the company if they no longer had to comply with the noncompete agreement. The District Court stated that the company provided “no evidence to meaningfully substantiate this fear, such as any indication that its employees are planning to leave, or examples of employees previously attempting to leave to join competitors.”
By contrast, the United States District Court for the Northern District of Texas issued a preliminary injunction blocking the FTC noncompete. The District Court concluded in the case of Ryan LLC v. Federal Trade Commission 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.
House Subcommittee Holds OSHA Oversight Hearing – The Subcommittee on Workforce Protections of the House Committee on Education and the Workforce held an oversight hearing on “Safeguarding Workers and Employers from OSHA Overreach and Skewed Priorities.” Representative Kevin Kiley (R-CA), chairman of the Subcommittee stated, “During the current administration, OSHA quickly established a reputation for pushing a regulatory agenda that is at odds with the interests of small businesses, workers, and the overall health of the American economy.”
Felicia Watson, Senior Counsel, Littler Mendelson, P.C. testified that “We all want to ensure that employers protect their workers, while at the same time ensuring that employees are able to work in workplaces that are safe and free from recognized hazards.” She criticized OSHA for what she believes is a perfunctory review process. Concerning the recently issued proposed heat hazard rule, she noted that the Office of Information and Regulatory Affairs (OIRA) held just four meetings with interested parties prior to approving a proposed rule that is 1,175 pages in length. She stated that “By truncating the potential to hear from members of the public interested in the rule, the Administration missed an opportunity to collect vital input from stakeholders before the regulation was made public.” She also believes that the heat hazard rule will present compliance challenges for employers since they may have no knowledge or control over the unknown risk factors of employees. Finally, she noted that the proposed heat hazard rule lacks the needed flexibility and imposes a single standard on employers and employees despite the different workplaces that exist.
Jordan Barab, former Assistant Secretary for OSHA called for increasing OSHA’s budget and making it “easier and faster to issue standards that save workers’ lives.” He believes that the health and safety standards issued by OSHA save the lives of workers and that OSHA has the legal authority to promulgate these standards. He made several recommendations for strengthening OSHA’s regulatory process including speeding up the process of issuing health and safety protections, increasing OSHA’s regulatory budget, passing legislation to allow for addressing urgent new hazards quicker in order to provide workers with needed protections, and enacting legislation authorizing OSHA to issue interim final standards.
NLRB Withdraws Appeal of Joint Employer Rule Litigation - The National Labor Relations Board (NLRB) has withdrawn an appeal of an opinion issued by the United States District Court for the Eastern District of Texas vacating the NLRB’s final rule on joint employers. The appeal in the case of Federal Trade Commission v. United States Chamber of Commerce was pending before the United States Court of Appeals for the Fifth Circuit. In its motion for voluntary dismissal of the appeal, the NLRB stated, “The Board remains of the opinion that its 2023 Rule meets the procedural and substantive requirements of the Administrative Procedure Act and the National Labor Relations Act.” The NLRB indicated that it would like the opportunity to consider the issues identified in the opinion of the District Court.
Legislation Introduced to Reinstate Chevron Doctrine – Legislation (H.R. 1507, S. 4987) has been introduced and would reinstate the Chevron deference doctrine. In a 6 – 3 decision in the case Loper Bright Enterprises v. Raimondo, the United States Supreme Court overturned a 40 year precedent and decided that the interpretation of statutes by federal agencies are not entitled to deference. The Stop Corporate Culture Act and the Restoring Congressional Authority Act are designed to codify the Chevron deference that directed courts to defer to the expertise of federal agencies when interpreting federal statutes. The principal sponsors of the Stop Corporate Culture Act are Senator Elizabeth Warren (D-MA) and Representative Pramila Jayapal (D-WA). The Restoring Congressional Authority Act was introduced by Senator Ron Wyden (D-OR).
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.