Tag: legal challenges

Supreme Court Decision Overturns Chevron: Impact on Cannabis Industry

Last month, the United States Supreme Court issued its decision and opinion in Loper Bright Enterprises v. Raimondo, significantly overruling the nearly 40-year-old precedent set by Chevron. The Chevron decision required federal courts to defer to a government agency’s interpretation of an ambiguous statute unless that interpretation was “arbitrary, capricious, or manifestly contrary” to the statute. This meant that if an agency such as the DEA published a bulletin or letter interpreting an ambiguous law, courts were generally bound to follow this interpretation due to the agency’s presumed expertise.

The Shift in Legal Interpretation

Loper Bright Enterprises has fundamentally changed this legal landscape. Now courts, rather than government agencies, are considered the best equipped to interpret ambiguous statutes. This shift means that a government agency’s interpretation of an ambiguous statute is now merely persuasive and not binding on the courts. This can be likened to a Pennsylvania court interpreting a Pennsylvania law and considering, but not being bound by, a Delaware state court’s interpretation of a similar corporate law. Just as Pennsylvania courts can choose to defer to, distinguish from, or disregard Delaware court decisions, federal courts now have the same discretion regarding agency interpretations of ambiguous statutes.

Impact on the Cannabis Industry

This change has significant implications for the cannabis industry. The Drug Enforcement Administration (DEA) enforces federal drug laws and has issued numerous letters and bulletins determining the legality of various cannabis substances. For example, the DEA issued opinions that seemingly argued that Delta-8 THC products and THCA products were not allowed under the 2018 Farm Bill. I have generally disagreed with these interpretations, believing that the DEA incorrectly cited statutes related to hemp at harvest rather than downstream products.

With Loper Bright Enterprises, these DEA letters will lose their authoritative value. Courts are no longer bound to follow DEA interpretations and can more readily consider arguments opposing the DEA’s stance. This development is critical for the cannabis industry, as it opens the door for courts to reinterpret federal drug laws and potentially challenge the DEA’s restrictive interpretations of the 2018 Farm Bill.

The Importance of This Shift

The overruling of Chevron by Loper Bright Enterprises marks a pivotal change in administrative law, particularly impacting the cannabis industry. This shift of interpretive authority from government agencies to the courts means there is now greater potential for legal challenges to restrictive interpretations of cannabis laws. This change enhances the ability of cannabis businesses and advocates to contest adverse decisions and interpretations by the DEA and other agencies, potentially leading to more favorable outcomes for the industry.

©2024 Norris McLaughlin P.A., All Rights Reserved
For more on Cannabis, visit the NLR Biotech Food Drug section

The FTC Has Banned Non-Competes: What Do Employers in the Energy Space Do Now?

When is the FTC’s rule effective?

The FTC’s non-compete ban is not in effect yet. It does not become effective until 120 days after the date of publication in the Federal Register of the final rule. The Federal Register is expected to publish the final rule next week, likely making the effective date around the beginning of September 2024.

Has litigation already been filed to challenge the non-compete ban?

The FTC’s non-compete ban is subject to at least two existing legal challenges seeking to have it invalidated. The U.S. Chamber of Commerce filed a Complaint for Declaratory Judgment and Injunctive Relief in U.S. District Court for the Eastern District of Texas, Tyler Division (Chamber of Commerce of the United States of America v. Federal Trade Commission, Case No. 6:24-cv-00148 (E.D. Tex. filed April 24, 2024); see also Ryan, LLC v. Federal Trade Commission, Case No. 3:24-cv-986 (N.D. Tex. filed April 23, 2024)). We don’t know whether these legal challenges will be successful, but we will provide updates when we know more.

What if the legal challenges are unsuccessful?

If the legal challenges are not successful and the rule goes into effect 120 days from next week (again, approximately early September 2024), here are steps that employers can take to get ready for the effective date:

  • Review existing agreements to determine if they are now “unfair methods of competition”:
    • One issue to analyze is whether an individual with a non-compete is a “worker” or a “senior executive.”
      • If a “senior executive,” then a non-compete in place that pre-exists that effective date can still be enforced.
      • If not a “senior executive,” then any non-compete clause that pre-dates the effective date for a worker is banned by the rule.
      • If an independent contractor (or another non-employee worker), any non-compete clause is banned.
    • Another issue to consider is whether non-solicitation, non-disclosure, or reimbursement provisions could be subject to the FTC ban. A provision that prevents a worker from seeking or accepting work in the U.S. with a different person or from operating a business in the U.S., then it is a “non-compete clause” that is subject to the rule. Depending on the wording and the factual circumstances, an obligation not to solicit customers could be considered a prohibited non-compete. For example, if an obligation not to solicit certain clients keeps a worker from accepting any job in the Permian Basin, it is arguable that the provision operates as a non-compete and violates the rule.
  • Determine whether notice is required: After reviewing which non-compete clauses are not in compliance with the FTC rule, prepare a notice for workers who are currently subject to a non-compete clause banned by the rule. The FTC put out model language on the notification, which informs the worker that the non-compete clause is no longer valid as of the effective date.
  • Update any form agreements: As part of the review of existing non-compete agreements, take the opportunity to update form agreements to remove now unenforceable non-compete (and possibly non-solicit) provisions. It is always a good idea to review and update the agreement generally to make sure that it reflects your current business and definition of confidential information.
  • Enter into non-compete agreements with “senior executives”:
    • The FTC ban permits non-compete agreements with “senior executives” that pre-exist the effective date to continue after the effective date. After the effective date, an employer may not require a senior executive to sign a new non-compete.
    • The term “senior executive” refers to officers earning more than $151,164 with “policy-making authority.” As so defined, the FTC estimates that senior executives represent less than 0.75% of all workers.
    • “Policy-making authority” means “final authority to make policy decisions that control significant aspects of a business entity or common enterprise and does not include authority limited to advising or exerting influence over such policy decisions or having final authority to make policy decisions for only a subsidiary of or affiliate of a common enterprise.”
    • Energy company officers of companies that are part of a common enterprise or joint venture will want to analyze whether senior executives have final authority that qualifies for a non-compete under the rule.
    • As always, any employer should make sure that a non-compete complies with existing state laws to assist in any enforcement efforts.
  • Take note of violations before the effective date: The FTC’s noncompete ban does not apply where a cause of action related to a noncompete clause accrued before the effective date. So, if a worker is violating a noncompete that would otherwise be banned under the FTC rule, an employer may want to consider whether to initiate legal action against that worker before the effective date to fall under this exception.
© 2024 Bradley Arant Boult Cummings LLP
For more on the FTC Noncompete Ban, visit the NLR Labor & Employment section.