The Federal Trade Commission's (FTC) ban on non-compete agreements was set to go into effect on September 4, but a Texas court has postponed its implementation by siding with plaintiffs in a lawsuit seeking to block the rule. In April, the FTC banned non-compete agreements, which have been widely used in the tech industry for years, to spur innovation and protect workers' rights and wages. Unsurprisingly, many companies are unhappy with the agency's rule, such as National Public Radio Notes: Dallas-based tax services firm Ryan LLC sued the FTC hours after its announcement. The U.S. Chamber of Commerce and other U.S. business groups eventually joined the suit.
“Noncompete clauses hold down wages, stifle new ideas and deprive the American economy of dynamism,” FTC Chairwoman Lina M. Khan said when the rule was announced. They prevent employees from moving to another company or starting their own businesses in the same industry, so they can be stuck working in a lower-paying job or in an environment they don't like. But Chamber of Commerce Senior Counsel Daryl Joseffer called the ban an attempt by the government to micromanage business decisions in a statement sent to the Chamber of Commerce. Bloomberg.
“The FTC's blanket ban on non-compete clauses is an unlawful power grab that defies the agency's constitutional and statutory authority and sets a dangerous precedent in which the government knows more than the markets,” Joseffer said. The FTC disagrees, saying: National Public Radio that his “authority is supported by both law and precedent.”
U.S. District Judge Ada Brown, an appointee of former President Donald Trump, wrote in her decision that “the text, structure, and history of the FTC Act reveal that the FTC lacks substantive rulemaking authority with respect to unfair methods of competition.” Brown also said that plaintiffs are “likely to succeed” in having the rule struck down and that it would be in the best public interest to grant the plaintiff’s motion for an injunction. She added that the court will make a decision “on the final merits of this action on or before August 30.”
