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Federal Court Blocks FTC’s Noncompete Ban
U.S. District Judge ADA BROWN of the NORTHERN DISTRICT OF TEXAS has blocked the FEDERAL TRADE COMMISSION’s (FTC) attempt to ban noncompete agreements. In a decision issued on TUESDAY (8/20), she ruled that the FTC exceeded its statutory authority and described the rule as “arbitrary and capricious.”
The decision halts the FTC’s ban, which was set to take effect on SEPTEMBER 4th. The ruling came after the U.S. CHAMBER OF COMMERCE and the tax firm RYAN challenged the FTC’s decision.
The FTC has said it is “seriously considering” an appeal and emphasized that the decision does not prevent the agency from pursuing noncompete issues through case-by-case enforcement actions.
The FTC voted in MAY to ban noncompete agreements, which critics argue suppress wages, stifle innovation, and prevents entrepreneurship. The proposed rule would have required employers to rescind existing noncompete agreements within six months and notify affected workers. The ban would apply to independent contractors and all workers, paid or unpaid, with almost no exemptions.
Despite the federal ruling, several states have already enacted their own bans on noncompete agreements. The WHITE HOUSE noted that around half of private-sector businesses require some employees to sign noncompete agreements, affecting an estimated 36 to 60 million workers.