Federal Judge Partially Blocks FTC Ban on Worker Noncompete Agreements

A Texas federal judge on July 3 partially blocked the Federal Trade Commission’s (FTC) rule banning worker noncompete agreements from taking effect this fall among a handful of employers, agreeing with business groups that the agency had exceeded its statutory authority in issuing the rule.
She stressed that the “role of an administrative agency is to do as told by Congress, not to do what the agency think[s] it should do.”
Ultimately, the judge blocked the FTC from enforcing the rule against the biggest business lobby in the United States—the U.S. Chamber of Commerce—Dallas, Texas-based tax firm Ryan LLC, the Business Roundtable, and other business groups, all of whom had filed a lawsuit against the rule.
“Plaintiffs are likely to succeed on the merits,” the judge found.
Still, Judge Brown stopped short of banning the rule from going into effect nationwide—as the business groups had requested—saying it was not clear whether such an order was appropriate.
For senior executives, existing noncompete agreements will stay in force beyond the effective date.
Roughly 30 million people, or 20 percent of U.S. workers, have signed noncompetes, according to the FTC.
They further argued the rule imposes an extraordinary burden on business owners seeking to protect their intellectual property.
The rule will also lead to the creation of more than 8,500 new businesses each year and an estimated average increase of 17,000 to 29,000 more patents each year for the next 10 years, according to the agency.
The agency has also argued it has the authority to issue the ban because noncompete agreements violate antitrust laws, meaning they fall within the agency’s broad powers to police anti-competitive conduct.
“We’re grateful that the U.S. Chamber of Commerce and Texas Association of Business joined our case shortly after we filed it,” Mr. Smith said. “We appreciate the many organizations—which together represent a vast swath of the American economy—that filed briefs supporting Ryan’s position.”
In an emailed statement to The Epoch Times, FTC spokesperson Douglas Farrar said the agency “stands by our clear authority, supported by statute and precedent, to issue this rule.”
“We will keep fighting to free hardworking Americans from unlawful noncompetes, which reduce innovation, inhibit economic growth, trap workers, and undermine Americans’ economic liberty,” the spokesperson said.