The U.S. District Court for the Northern District of Texas on Aug. 20 set aside the Federal Trade Commission’s (FTC’s) proposed ban on most noncompete agreements. This means the rule will not be enforced or take effect on Sept. 4 as intended.
Judge Ada E. Brown ruled that the FTC didn’t have the authority to issue such a broad action and that the rule was arbitrary and capricious.
“The Commission’s lack of evidence as to why they chose to impose such a sweeping prohibition ... instead of targeting specific, harmful noncompetes, renders the rule arbitrary and capricious,” Brown wrote.
She ruled in favor of the plaintiffs in the case: tax services and software provider Ryan LLC; the U.S. Chamber of Commerce; the Business Roundtable; the Texas Association of Business; and the Longview Chamber of Commerce. Her decision renders the injunction against the rule permanent and nationwide.
The FTC proposed the rule in April, stating that noncompete clauses suppress wages and constitute an unfair method of competition. The agency estimated that about 20% of U.S. workers (approximately 30 million people) are bound by a noncompete agreement.
The FTC’s ban would have covered all existing and new noncompete agreements for U.S. workers, with exceptions for certain industries (airlines, financial services, and nonprofits). In addition, it would have prohibited employers from creating new noncompete agreements with “senior executives,” defined as people earning more than $151,164 annually...
The Justice Department has fired back at the Southern Poverty Law Center after it filed an injunction against Acting Attorney General Todd Blanche for saying the group didn’t share information from...