Federal Judge Blocks FTC's Noncompete Ban

A federal judge in Texas has blocked a rule from the U.S. Federal Trade Commission that would ban noncompete agreements. The judge ruled that the FTC lacks the authority to impose such a sweeping ban. The decision marks a significant win for business groups advocating against the ban.

A federal judge in Texas on Tuesday blocked a rule from the U.S. Federal Trade Commission (FTC) that aimed to ban noncompete agreements commonly signed by employees. U.S. District Judge Ada Brown stated that the FTC lacked the authority to enforce such a broad rule under federal antitrust laws.

The rule, initially set to take effect on September 4, was temporarily halted by Brown in July following a challenge led by the U.S. Chamber of Commerce and tax service firm Ryan. Brown explained in her ruling that even assuming the FTC had the authority to implement the rule, the agency did not provide sufficient evidence to justify a sweeping ban on noncompetes.

FTC spokesperson Victoria Graham expressed disappointment and indicated that the agency is considering a potential appeal. Chamber of Commerce President Suzanne Clark praised the decision as a significant victory against government micromanagement. The Democratic-controlled FTC had approved the rule in May, arguing that noncompetes unfairly limit competition and suppress wages and worker mobility. However, business groups maintain that the ban could jeopardize trade secrets and other confidential information.

(With inputs from agencies.)