A federal judge ruled Tuesday Blocked a nationwide ban The ban on non-competition agreements will come into effect in September.
In April, the Federal Trade Commission voted to ban most non-compete agreements that prevent tens of millions of employees from quitting their jobs to work for or start a competing business.
Dallas-based tax firm Ryan LLC, the U.S. Chamber of Commerce, the Business Roundtable and other business groups filed a lawsuit to block the rule, arguing it is an abuse of the agency’s power and will make it harder for companies to retain talent.
U.S. District Judge Ada Brown in Dallas said the FTC had exceeded its statutory authority and called the rules “arbitrary and capricious.”
“This victory upholds the validity of millions of employment contracts across the country that foster trust between employers and employees, innovation through protection of intellectual property, and investment in employee training,” said John Smith, Ryan’s senior vice president, chief legal officer and general counsel.
Chamber President and CEO Suzanne P. Clark called the decision “a major victory for the Chamber in its fight against government micromanagement of business decisions.”
“The FTC’s blanket ban on non-compete agreements is an unlawful expansion of power that puts American workers, businesses and the American economy at a competitive disadvantage,” Clark said.
The rule was scheduled to come into effect on September 4th.
“We are disappointed in Judge Brown’s decision and will continue to fight to stop non-compete clauses that limit the economic freedom of hard-working Americans, stifle economic growth, restrict innovation and depress wages,” FTC spokeswoman Victoria Graham said.
“We are seriously considering a possible appeal, and today’s decision does not preclude the FTC from addressing non-compete clauses through individual enforcement actions.”
Last month, a federal judge in Philadelphia rejected a motion by tree-pruning company ATS Tree Services to block the ban, arguing that the FTC has the power under the Federal Trade Commission Act of 1914 to “prevent unfair competitive practices in commerce.”
Josh Robbins, an attorney at Pacific Legal Foundation who represents ATS, said he was “pleased” with Tuesday’s ruling.
“This is a great first step, and we expect litigation over the ban will continue,” Robbins said.
Updated at 7:53pm ET.
