Court rules that Non-Compete ban cannot be implemented

August 23, 2024/Business, Regulations/

Back in April Funeral Director Daily brought you this article which was titled “Federal Trade Commission bans non-compete agreements”. The article went on to explain that the Federal Trade Commission made this decision as a regulatory agency and explained the upcoming results of the decision like this:

“This is a comprehensive ban on noncompetes with workers in all for-profit businesses in the United States. . . . . Further, employers must provide workers with existing non-competes notice that they are no longer enforceable.”

As you can understand, that decision had large implications on the Death Care profession where Non-Compete agreements can be pretty commonplace among employers and their employees.

However, just this week according to an article in Seeking Alpha, “The Federal Trade Commission’s ban on non-competes has been struck down by a federal judge in Texas on grounds that the agency does not have the authority to issue such broad-based rules. . . “

United States District Judge Ada Brown wrote in this ruling, “The commission’s lack of evidence as to why they chose to impose such a sweeping prohibition… instead of targeting specific, harmful non-competes, renders the rule arbitrary and capricious. The role of an administrative agency is to do as told by Congress, not to do what the agency thinks it should do. The FTC exceeded its statutory authority and the rule would cause irreparable harm.”

Here’s a recent article on this court action.

Funeral Director Daily take: I’m not a lawyer and I don’t purport to be so my take on this action will be as a layman observer. It appears to me that the ability to confront this decision started with the decision of the United States Supreme Court in its 2024 ruling overturning a 40-year decision in what is referred to as the “Chevron” case.

Tom Anderson
Funeral Director Daily

The Chevron decision of about 40 years ago gave “the federal judiciary the ability to defer to agencies’ reasonable interpretations of ambiguous federal laws”. According to this article from White & Case about the overturning of this doctrine, “In a 6-3 (June 2024) decision, Chief Justice Roberts wrote that the judiciary has the sole prerogative to “say what the law is. The demise of Chevron provides new avenues for regulated industries to challenge their regulators”.

Again from my layman’s point of view, the overturning of the 40-year “Chevron” doctrine will make it much more difficult for regulatory agencies, such as the Federal Trade Commission, to impose regulations on businesses without a direct correlation to the laws Congress passes.

I think it is interesting from the Death Care regulatory perspective. “Chevron” has been the “go-to” interpretation on regulatory action for almost the same identical period that the FTC’s “Funeral Rule” has been in effect. I wonder if the demise of “Chevron” will have some effect on the “Funeral Rule” and, especially, the anticipated new “Funeral Rule”?

Related Article — U.S. Supreme Court strikes down Chevron Decision. What you need to know. White & Case

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