IS IT BUSINESS as usual for employers on noncompete agreements after a US judge in Texas blocked the Federal Trade Commission’s near-total ban? Not necessarily. But many legal observers believe the agency now lacks good options for making its regulation stick after a century of rarely using its rulemaking authority on competition.

The clearest legal response seems to be appealing to the Fifth Circuit, Justin Wise reports. The agency said it’s “seriously considering” that course, but it’s debatable whether that’s the right play. It would risk a ruling from the nation’s most conservative circuit court that could cement US District Judge Ada Brown’s decision — that the FTC’s rulemaking authority doesn’t extend to a nationwide measure covering unfair competition.

• “This has always been an uphill battle to try to create a new sweeping power,” said Stephen Calkins, a Wayne State University law professor and former FTC general counsel. “Courts are much less interested in deferring to administrative agencies.”

Any effort to get the Supreme Court to weigh in would entail perhaps even greater peril after its Loper Bright decision scrapped the 40-year-old Chevron deference framework that empowered regulators to interpret unclear laws. Consider Brown’s opinion. The agency believes the rule is justified by the Federal Trade Commission Act, which gave it authority to prevent “unfair methods of competition” and spelled out a power “to make rules and regulations” to carry out a specific provision of the 1914 law. But Brown held that the measure’s text and history showed the provision to be “a house keeping statute” for procedural matters, not a vehicle conferring broad regulatory powers over competition.

• “The role of an administrative agency is to do as told by Congress, not to do what the agency thinks it should do,” Brown said. In the post-Chevron world, that’s more or less the kind of court opinion every federal agency is trying to avoid on regulatory matters — even when the law isn’t ambiguous. Read More

What Now? For the moment, businesses can keep using noncompetes as they did prior to April, when the FTC issued its final rule — and ventured into an area of law that’s traditionally been governed by states, Chris Marr reports. While there’s no other federal statute or regulation that explicitly limits noncompetes, the FTC has the power to address the restrictive employment covenants via case-by-case enforcement. That’s something the agency noted — hint, hint — after getting shot down by Brown. Read More

• “The FTC will likely bring enforcement actions to make an example of two types of companies — those abusing noncompetes and those that are high-profile and will make headlines,” said Russell Beck, an employment lawyer at Beck Reed Riden.

Many attorneys have been warning businesses to think more strategically about which employees they ask to sign noncompetes and how broadly the contracts are drafted, rather than asking all employees to sign them when hired.

Wrinkle Upon Wrinkle: Keep in mind that the Democratic-led National Labor Relations Board has a chance to create precedent on whether employers’ use of restrictive covenants is an unfair labor practice. The board is considering a case in which an NLRB administrative law judge held that a company’s noncompete and nonsolicitation policies violated federal labor law.

• Such a decision would certainly be challenged — the NLRB has been quite the legal target of late, after all. Even if that were to happen, there’s another potential wrinkle that could come into play. Federal courts have applied a deferential approach to assessing the board’s findings for a long time — 90 years or so. But a recent Sixth Circuit opinion portends more substantive clashes between appeals courts over the impact of Loper Bright on legal challenges to NLRB decisions, Robert Iafolla reports. Read More

THE SUMMER has been unusually busy for the US Supreme Court, which has fielded a steady clip of requests from Republican-led states and industry groups seeking to block Biden administration policies, Lydia Wheeler and Kimberly Strawbridge Robinson report.

• The full court has decided 10 emergency applications since its recess began July 1. And it’s on track to more than triple that number before the new term starts in October. That would outpace even the pandemic summer of 2020, “when there were emergencies everywhere,” and the justices handled 21 emergency requests, said Georgetown Law professor Steve Vladeck, who’s been tracking the requests and shared the data with Bloomberg Law.
• Once used primarily for last-minute stay requests in death penalty cases, the so-called shadow docket now covers a broader scope of issues that often reflect national political divisions on matters like abortion and federal agency power. Critics say the court risks undermining its credibility by stepping into matters of national importance through the truncated process. Read More

THE FALL SCHEDULE is looking less-than-busy, but not unfamiliar. More than two dozen cases have been granted for the upcoming term, but the justices are still a handful short of the number needed to fill the first three argument sittings in October, November, and December, Kimberly reports. That’s consistent with the court’s recent pattern of backloading arguments and opinions, creating crunch time in the term’s final weeks. Read More

THE HIDDEN COSTS of artificial intelligence may come at the planet’s expense. Tech companies like Amazon, Microsoft, and Meta are concealing the actual carbon footprints of their push into energy-intensive AI products, Akshat Rathi and Natasha White report, based on a Bloomberg Green analysis.

• Carbon accounting rules allow for use of credits for calculating a company’s carbon footprint that can make it seem that power consumed from a coal plant came instead from a solar farm. Alphabet Inc.'s Google phased out its use of unbundled renewable energy certificates several years ago, after acknowledging that these carbon savings on paper are not actual emissions reductions in the atmosphere.
• If those credits weren’t counted, Amazon could be forced to admit that its 2022 emissions were three times what it disclosed; Microsoft’s total could be 3.3 million tons higher than its reported tally of 288,000 tons; and Meta’s reported footprint could grow by 740,000 tons, from near zero.
• “If consumers do not understand what the climate impact of AI is, because tech companies do not transparently report on it, then there’s no incentive for consumers to change their behavior and change to a different AI model,” said Silke Mooldijk, of the nonprofit NewClimate Institute. Read More

MANY FEDERAL COURTS are buried in work. While confirming federal judges is a challenge (like anything on Capitol Hill), it’s far more difficult to create new judgeships — but legislation to do just that recently passed in the Senate.

• “Congress used to more routinely pass legislation to add additional judgeships so that courts could keep pace with the populations they were serving,” Suzanne Monyak explains on a new episode of our On The Merits podcast. “But the last major bill that broadly added judges was back in 1990 and not a single additional judgeship has been added in more than 20 years.” Suzanne and Bloomberg Law’s Tiana Headley discuss their reporting on overloaded courts and why the situation is unlikely to change before the election. Listen Here

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