The Federal Trade Commission’s (FTC) efforts to ban noncompete agreements has been blocked by a federal judge in Texas. According to The Washington Post, US District Judge Ada Brown has determined that the agency doesn’t have the authority to enforce the rule, which was supposed to take effect on September 4. She reportedly wrote in her decision that the FTC only looked at “inconsistent and flawed empirical evidence” and didn’t consider evidence in support of noncompetes. “The role of an administrative agency is to do as told by Congress, not to do what the agency thinks it should do,” she added.
FTC Chair Lina M. Khan explained that “noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism” when the agency voted 3-2 in favor of the ban. Noncompete agreements are widely used in the tech industry, and preventing companies from adding them to contracts would mean that workers will be able to freely move to a new job or start a business in the same field. The two Republican commissioners in the FTC, Melissa Holyoak and Andrew Ferguson, voted against the ban and also said that the agency “overstepped the boundaries of its power.”
In July, Brown temporarily blocked the rule’s enforcement to assess the lawsuit filed by Dallas tax services firm Ryan LLC mere hours after the FTC announced the ban. The US Chamber of Commerce and other groups of American businesses eventually joined the tax firm in challenging the new rule on noncompete clauses.
“We are disappointed by Judge Brown’s decision and will keep fighting to stop noncompetes that restrict the economic liberty of hardworking Americans, hamper economic growth, limit innovation, and depress wages,” FTC spokesperson Victoria Graham told The Post. “We are seriously considering a potential appeal, and today’s decision does not prevent the FTC from addressing noncompetes through case-by-case enforcement actions.”
A federal judge in Florida also blocked the rule last week, though only for the lawsuit’s plaintiffs. Meanwhile, another judge in Pennsylvania ruled last month that the agency has the authority to enforce the ban in a separate case filed by a tree-care company in the state. All three cases could still be appealed and could even make their way to the Supreme Court.
