The Federal Trade Commission (FTC) is appealing a federal court ruling that struck down the agency’s proposed ban on most noncompete agreements.
The FTC filed its appeal Oct. 18 to the U.S. Court of Appeals for the Fifth Circuit challenging an Aug. 20 decision by the U.S. District Court for the Northern District of Texas which set aside the agency’s rule on noncompetes.
The judge in that case—Ryan LLC v. FTC—ruled that the FTC didn’t have the authority to issue such a broad action and that the rule was arbitrary and capricious.
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.
The FTC approved 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 rule had been scheduled to go into effect on Sept. 4.
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 who are in a “policymaking position.”
The rule would have also required...
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