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Employers scored a victory on Tuesday as the bid by the Federal Trade Commission to ban noncompete agreements was rejected by a federal judge in Texas. The FTC federal rule was set to be enforced on Sept. 4. The FTC says roughly 30 million, or 1 in 5 workers, are subject to noncompete agreements.
The court’s ruling prohibits the FTC from enforcing the noncompete ban and provides nationwide relief for employers. Still, the decision does not prevent the agency from addressing noncompete agreements through “case-by-case” enforcement actions, said Victoria Graham, an FTC spokesperson. The FTC is also considering appealing the court’s decision, Graham said.
In Ryan LLC v. Federal Trade Commission, Judge Ada Brown (U.S. District Court for the Northern District of Texas) granted a motion for summary judgement filed by the U.S. Chamber of Commerce and other plaintiffs and rejected the FTC’s own petition for a judgement in its favor. Brown concluded that that the FTC “exceeded its statutory authority” in making the rule.
Judge Brown also concluded that the rule would cause irreparable harm.
Ryan is the same case in which Judge Brown issued a preliminary injunction, partially blocking the federal ban in July. Unlike the court’s earlier ruling which only applied to the parties in the lawsuit, the Aug. 20 judgment applies to all employers and employees across the country.
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