U.S. President Joe Biden speaks to the media after the Democratic National Convention (DNC) in Chicago, Illinois, the United States, on August 20, 2024.
Craig Hudson | Reuters
A federal judge in Texas on Tuesday blocked a Federal Trade Commission rule from taking effect that would have barred workers from generally signing agreements not to join their employer’s competitors or conduct competing businesses.
U.S. District Judge Ada Brown in Dallas said the Federal Trade Commission, which enforces federal antitrust laws, does not have the power to adopt broad rules to ban what it considers unfair methods of competition.
Brown has Temporary blocking rules In July, she considered the U.S. Chamber of Commerce, the nation’s largest business lobby, and tax services firm Ryanair to veto the bill outright. The rule is Setting takes effect September 4th.
Brown said in his ruling that even if the FTC had the authority to adopt the rule, the agency would have no reason to ban nearly all noncompete agreements.
“The committee’s lack of evidence as to why they chose to impose such a blanket ban … rather than targeting specific, harmful non-competes makes the rule arbitrary and capricious,” wrote Brown, an appointee of Republican former President Donald Trump.
FTC spokesperson Victoria Graham said the agency was disappointed with the ruling and was “seriously considering a possible appeal.”
“Today’s decision does not prevent the FTC from addressing non-compete issues through case-by-case enforcement actions,” Graham said in a statement.
The chamber did not immediately respond to a request for comment.
The Democratic-controlled Federal Trade Commission (FTC) approved the ban on non-compete agreements in a 3-2 vote in May. The commission and supporters of the rule say the agreements are unfair restrictions on competition, violate U.S. antitrust laws and depress workers’ wages and mobility.
According to the FTC, approximately 30 million people, or 20% of U.S. workers, have signed non-compete agreements.
The commission often adopts industry-specific rules, such as requiring telemarketers to make certain disclosures or forcing gas stations to display fuel grades, but it is less common for the agency to issue bans on broader business practices.
business groups argued Congress never intended to give the FTC such broad authority, and prohibiting noncompetes would make it difficult to protect trade secrets and other confidential information.
Last week, a federal judge in Florida ruled The ban may be invalid and prevent its application to real estate developers. But a judge in Philadelphia took another road In July, the FTC reasonably concluded that noncompetes were never actually justified.
