A sweeping federal ban on noncompete agreements — which was set to take effect for tens of millions of Americans nationwide on Sept. 4 — is now permanently on hold.
In a ruling Tuesday, a federal judge in Texas upheld a challenge to the FTC’s rule banning noncompetes, saying the government agency lacks the authority to put the ban in place.
An estimated 30 million Americans — 1 out of every 5 workers — are employed with noncompete agreements in industries ranging from tech to fast food. The FTC argues the agreements stifle workers’ ability to switch jobs and earn higher wages.
The FTC rule would have meant that anyone applying for a new job could not be forced to sign a noncompete. For workers with existing agreements, noncompetes would no longer be enforceable.
The decision from U.S. District Judge Ada Brown means those changes are effectively blocked.
The Federal Trade Commission seal on the wall at the organizations’ headquarters in Washington, May 20, 2024.
Bloomberg via Getty Images
In a statement to ABC News, FTC spokesperson Victoria Graham said the agency is “seriously considering a potential appeal” of the decision.
“We are disappointed by Judge Brown’s decision and will keep fighting to stop noncompetes that restrict the economic liberty of hardworking Americans, hamper economic growth, limit innovation, and depress wages,” Graham said.
The lawsuit was filed by the U.S. Chamber of Commerce along with a Texas tax firm, which argued that the rule was too broad and that the FTC overstepped its authority.
“This decision is a significant win in the Chamber’s fight against government micromanagement of business decisions. A sweeping prohibition of noncompete agreements by the FTC was an unlawful extension of power that would have put American workers, businesses, and our economy at a competitive disadvantage,” U.S. Chamber of Commerce President and CEO Suzanne Clark said in a statement.
A federal judge recently made a significant ruling that has implications for workers across the country. The Federal Trade Commission (FTC) had issued a ban on worker noncompete agreements, which are contracts that prevent employees from working for a competitor after leaving their current job. However, the ban was blocked by a federal judge, allowing companies to continue using these agreements for the time being.
Noncompete agreements have been a controversial topic in recent years, with critics arguing that they limit workers’ ability to find new job opportunities and stifle competition in the labor market. Proponents of noncompete agreements, on the other hand, argue that they are necessary to protect companies’ trade secrets and prevent employees from taking valuable knowledge to competitors.
The FTC’s ban on worker noncompete agreements was seen as a step towards protecting workers’ rights and promoting a more competitive labor market. However, the federal judge’s ruling has put a halt to this effort, at least for now.
The judge’s decision has sparked debate among legal experts, labor advocates, and business leaders. Some argue that noncompete agreements are unfair and should be banned altogether, while others believe that they serve a legitimate purpose in protecting companies’ interests.
It is important for workers to be aware of the implications of noncompete agreements and to understand their rights when entering into such contracts. Employees should carefully review any noncompete agreements before signing them and seek legal advice if they have concerns about the terms of the agreement.
While the FTC’s ban on worker noncompete agreements has been blocked for now, the issue is likely to continue to be a topic of debate in the coming years. It remains to be seen whether further action will be taken to regulate noncompete agreements and protect workers’ rights in the future.
