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Judge Temporarily Blocks FTC Ban On Noncompete Agreements
https://www.whatjobs.com/news/usa/us-business-news/judge-temporarily-blocks-ftc-ban-on-noncompete-agreements
By Nithya Bose in Business News, posted July 4, 2024
A federal judge has backed an initial lawsuit against the Federal Trade Commission’s (FTC) ban on noncompete agreements.
Judge Ada Brown granted an injunction requested by several plaintiffs, temporarily preventing the ban’s enforcement until a final ruling.
Judge Brown of the US District Court for the Northern District of Texas said the FTC lacks “substantive rule-making authority” over unfair competition methods.
The plaintiffs are “likely to succeed on the merits” of their challenge.
A final decision is expected by the end of August.
Douglas Farrar, an FTC spokesperson, said the commission “stands by our clear authority, supported by statute and precedent, to issue this rule.”
The FTC estimates banning noncompete agreements could increase workers’ earnings by at least $400 billion over the next decade.
The decision could affect roughly 30 million American workers.
The legal challenge began in April when the tax firm Ryan LLC sued to block the near-total ban,
This came hours after the FTC voted to adopt the rule.
The plaintiffs are “likely to succeed on the merits” of their challenge
The US Chamber of Commerce, Business Roundtable, and two Texas business groups later joined the case.
Business groups argue the ban would hinder their ability to protect trade secrets and confidential information.
They say the FTC lacks the constitutional and statutory authority to enforce such a rule.
The Supreme Court’s recent decision to limit the broad regulatory power of federal agencies may pose additional legal hurdles for the FTC.
Mark Goldstein, a labor and employment lawyer at Reed Smith, noted the injunction indicates a strong likelihood Judge Brown will deem the FTC’s rule invalid.
This could potentially prevent its nationwide implementation in September.
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The FTC’s ban on noncompetes has garnered significant attention, but other federal agencies and state legislatures are also taking action against restrictive covenants.
A National Labor Relations Board judge recently ruled that a noncompete clause constitutes an unfair labor practice, adding to the growing scrutiny of such agreements.
State governments are actively promoting worker mobility, with recent legislation in Rhode Island joining Minnesota, California, Oklahoma, and North Dakota banning noncompetes.
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