A Federal Trade Commission (FTC) ban on noncompete agreements was blocked through a ruling by Texas Federal Judge Ada Brown on Tuesday. The ban was set to go into effect on September 4, which would have allowed employees bound by such agreements to be involved with competing businesses.
The Federal Trade Commission voted in April to ban noncompete agreements from employment contracts, allowing workers to freely switch to rival companies after leaving a job. The new measure, approved 3-2 by the FTC Democrat majority, has been a longstanding policy goal popular among the general workforce, particularly low-income workers.
US District Judge Ada Brown ruled in favor of the US Chamber of Commerce and a Texas-based tax firm that sued to prevent the new rule from being implemented. Brown said the FTC was “unreasonably overbroad without a reasonable explanation.”
A spokesperson for the FTC said that they are considering appealing the ruling, stating:“We are disappointed by Judge Brown’s decision and will keep fighting to stop noncompetes that restrict the economic liberty of hard working Americans, hamper economic growth, limit innovation, and depress wages.”
The decision may be appealed to the US 5th Circuit Court of Appeals in New Orleans.
According to a Chamber of Commerce spokesperson, the FTC rule was “an unlawful extension of power that would have put American workers, businesses and our economy at a competitive disadvantage.”
Some have criticized the ruling, highlighting that Judge Brown was appointed by President Donald Trump.
Trump judge in Texas: I am free to ignore clear statutory text if it is not to my liking https://t.co/QQDOfRpbSI
— Sandeep Vaheesan (@sandeepvaheesan) August 20, 2024
Others have had a more moderate position, arguing that the FTC overstepped its authority.
A Texas judge struck down the FTC’s noncompete ban
While I sympathize with the idea of eliminating non-competes, it is a great day for investors when courts block unlawful actions by overzealous government agencies such as the FTC pic.twitter.com/qoZ00EYG1Y
— Julian Klymochko (@JulianKlymochko) August 20, 2024
It is estimated that around 30 million workers in the US are in noncompete agreements, which limit their ability to work for another company or start a business in the same industry. For businesses, the agreements ensure that valuable training capital and proprietary information aren’t used against them. Workers may want to see the agreements banned, however, to open up alternative career options.
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