Small Businesses Take Legal Action Against FTC Ban on Noncompete Agreements

The National Federation of Independent Business (NFIB) has filed an amicus brief in the case of Ryan, LLC v. Federal Trade Commission (FTC) at the U.S. District Court for the Northern District of Texas. The brief supports a challenge to the FTC’s final rule banning noncompete agreements, which was issued in April 2024. The NFIB argues that the FTC lacks the authority FTC lacks the authority to enforce such a ban.

Beth Milito, Executive Director of NFIB’s Small Business Legal Center, criticized the rule:

“The FTC’s final rule on non-competes is a textbook example of arbitrary rulemaking. The final rule leaves small businesses with vague conditions that make it difficult for owners to correctly comply. The FTC’s unelected bureaucrats continue to misrepresent the needs of small businesses and the impact the Commission’s flawed policies will have on Main Street. Our amicus corrects the record. We are hopeful that the Court will reject the FTC’s final rule.”

The NFIB’s brief presents two main arguments against the FTC’s rule:

1. Flawed Cost-Benefit Analysis: The brief asserts that the FTC based the final rule on a seriously flawed cost-benefit analysis, which misrepresents the economic impact on small businesses.
2. Arbitrary and Capricious Reasoning: The brief argues that the FTC’s reasoning is fallacious and internally inconsistent, making the rule arbitrary and capricious.

The NFIB filed the brief with support from several business associations, including:

• National Retail Federation
• International Franchise Association
• Associated Builders and Contractors
• American Hotel & Lodging Association
• National Association of Wholesale Distributors
• Independent Electrical Contractors
• Consumer Technology Association
• Home Care Association
• Restaurant Law Center
• U.S. Council for International Business

The NFIB’s legal challenge to the FTC’s ban on noncompete agreements underscores the ongoing tension between regulatory bodies and small business interests. By filing the amicus brief, the NFIB aims to protect small businesses from what it views as overreach by the FTC.

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