As a follow up to my Article “Why Veterinary Non-Competes are Here to Stay Despite the Proposed Ban By the FTC” published with VetPartners.org, the FTC officially adopted the proposed rule in a 3-2 vote today that has already sent shockwaves through the veterinary community. While there are valid considerations to each side of the rule, the arguments raised by the two dissenting FTC Commissioners are telling. Legal challenges will ensue making it highly unlikely the proposed rule will actually take effect anytime soon.

The issue is not whether restrictive covenants or non-compete agreements are fair, or even if restrictive covenants and non-compete agreements should be reigned in to some respect. The question is whether a governmental agency under the control of the Executive Branch has rule making authority generally reserved to the Legislative Branch (Congress)? The majority argues that the FTC Act delegates authority from Congress to the Executive Branch, but ultimately relies on antiquated rulings that have been called into question by recent opinions from the United States Supreme Court. In contrast, the dissenters referenced language from Util. Air Regulatory Grp. v. EPA, 573 U.S. 302, 134 S. Ct. 2427, 2434 (2014) requiring “clear congressional authorization” to satisfy the “non-delegation doctrine”.

In short, these recent Supreme Court decisions cast doubt on proclaimed legal authority when an agency claims to uncover a long-extant, unheralded power over a significant portion of the American economy. Instead, the Court looks for “clear congressional authorization” for Congress to pass such rulemaking authority to a legislative agency as required by the “nondelegation doctrine” routed in the balance of powers left to the legislative branch, rather the executive branch, in the United States Constitution. In other words, Congress will likely have to directly approve such a substantive, rather than procedural, change to states’ longstanding ability to self-govern employment-related restrictive covenants.

Remember Student Loan Forgiveness?

Do you recall when President Biden attempted to cancel student loan debt through the Department of Education? This too reverberated through the veterinary community until the Supreme Court in Biden v. Nebraska, 600 U.S. 477, 143 S. Ct. 2355 (2023) struck it down holding the Executive Branch is without authority to cancel student loan balances without Congressional authority. The issue before the Court was not the reasonableness or fairness of loan cancelation, rather who has the power to enact such laws. In the simplest of arguments, the Court held that “clear congressional authorization” by Congress to the Executive branch (or governmental agency) would be necessary for any such action as required by the United States Constitutions guarantee of a balance of power.

Legal Challenges Forthcoming

Similarly, it is anticipated that a Federal District Court will soon issue a nationwide injunction to the FTC Non-Compete Rule that will both delay and confuse enforcement procedures. From there we will have to wait for the Appellate Courts to weigh in before the United States Supreme Court decides whether to take up the issue. Needless to say, we are a long way away before the FTC’s Non-Compete Rule sees actual daylight, if at all. Until then, employers and employees will be forced into limbo.

Contact Our Experienced Nationwide Veterinary Attorneys 

If you need veterinary legal assistance of any kind, including compliance and consultation regarding the new FTC ruling, non-compete agreements, or veterinary employment agreements, Mahan Law is on your side. Please contact us today to schedule an initial consultation with one of our experienced and knowledgeable veterinary lawyers.