The Federal Trade Commission’s ban on noncompete agreements was blocked Tuesday in a U.S. District Court.
The FTC ban was to go into effect Sept. 4.
In a 27-page judgment, Judge Ada Brown of the U.S. District Court for North Texas ruled the FTC lacked the statutory authority to issue the ban and that the rule was arbitrary.
“The rule imposes a one-size-fits-all approach with no end date, which fails to establish a rational connection between the facts and the choice made,” Brown wrote in his decision.
The decision also stated that the commission relied on “a handful of studies that examined the economic effects of various state policies toward noncompetes.”
The decision from Brown followed her previous order partially halting the enforcement of the Federal Trade Commission’s ban on non-compete clauses.
The FTC proposed the rule in January 2023 and received more than 26,000 comments.
In February 2023, the U.S. Chamber of Commerce sent a letter to U.S. congressmen in opposition to the proposed rule. NIADA signed the letter, joining dozens of other federal, regional and state associations, in opposition. The letter questioned the FTC’s authority to issue the ban and raised concern about the impact on the industry.
The FTC announced its final rule banning non-competes in April. Under the rule, existing non-competes for senior executives can only be enforced for employees earning more than $151,164 and in “policy-making” positions. The ban does not eliminate trade secret regulations and non-disclosure agreements.
The U.S. Chamber of Commerce, Business Roundtable, Ryan LLC, Texas Association of Business and Longview Chamber of Commerce had challenged the ban.
