A US Judge Blocks the FTC’s Noncompete Ban

In a significant setback for the Federal Trade Commission (FTC), US District Judge Ada Brown ruled that the agency does not have the authority to enforce a rule banning noncompete agreements. The ruling, from the US District Court for the Northern District of Texas, grants a preliminary injunction that halts the FTC’s enforcement of the ban for the plaintiffs involved in the case.

The FTC proposed the rule in April, aiming to invalidate most existing noncompete clauses and prohibit future ones, arguing that they restrict workers’ mobility and economic freedom. However, Judge Brown, appointed by former President Trump, contended that the FTC lacks the substantive rulemaking authority under Section 6(g) of the FTC Act to enforce such regulations.

The lawsuit, initiated by tax services firm Ryan, LLC, and supported by the US Chamber of Commerce and other business groups, challenged the FTC’s jurisdiction over noncompete agreements. Judge Brown’s decision delays the rule’s effective date for the plaintiffs until a ruling on the case’s merits is expected by August 30.

This ruling highlights broader judicial scrutiny over federal agency rulemaking, following recent Supreme Court decisions that limit agency discretion in interpreting statutes. The FTC plans to continue its legal battle, emphasising the rule’s potential benefits in fostering innovation and economic growth while freeing workers from restrictive employment practices.


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