The Federal Trade Commission is dropping its appeal in the lawsuit challenging its non-compete ban.<\/p>\n\n\n\n
The FTC had issued a rule in April 2024, calling for the end of non-competes except for senior executives earning more than $151,164 and in \u201cpolicy-making\u201d positions. The ban did not eliminate trade secret regulations and non-disclosure agreements.<\/p>\n\n\n\n
The U.S. Chamber of Commerce, Business Roundtable, Ryan LLC, Texas Association of Business and Longview Chamber of Commerce challenged the ban.<\/p>\n\n\n\n
Judge Ada Brown of the U.S. District Court for North Texas<\/a> ruled the FTC lacked the statutory authority to issue the ban.<\/p>\n\n\n\n \u201cThe 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,\u201d Brown wrote in her decision.<\/p>\n\n\n\n The decision also stated that the Commission relied on \u201ca handful of studies that examined the economic effects of various state policies toward noncompetes.\u201d<\/p>\n\n\n\n The FTC initially appealed the decision. This week, under the direction of Chairman Andrew Ferguson, who took over leadership of the agency in January, the FTC announced it would drop the appeal and vacate the rule.<\/p>\n\n\n\n Ferguson stressed in a statement that the rule was not legal in its attempt to end 30 million agreements between employees and employers.<\/p>\n\n\n\n \u201cThe Rule did not protect a single American worker, nor did it bring any relief to a single worker who is stuck in a job because of a noncompete agreement. And that is a shame. As I have said, noncompete agreements can be pernicious,\u201d Ferguson said. \u201cThey can be, and sometimes are, abused to the effect of severely inhibiting workers\u2019 ability to make a living. That is why English law categorically prohibited them until the 18th century. That is why all 50 states regulate them extensively, and why some outright ban them. And that is why Congress, through the FTC Act and the Sherman Act, gave us the authority to step in when they are onerous enough to become unlawful. The Commission should have been doing everything it could to find unlawful noncompete agreements and eliminate them.\u201d<\/p>\n\n\n\n He did warn that the FTC will move to prevent unlawful noncompete agreements. Last week, the FTC ordered a pet cremation company<\/a> to stop enforcing noncompete agreements against its employees, freeing nearly 1,800 employees from the pacts.<\/p>\n\n\n\n