A federal judge ruled Wednesday A preliminary injunction was granted The company voted this spring to ban non-compete agreements nationwide, but opposition from powerful business groups has cast doubt on the company’s future.
Dallas-based tax firm Ryan LLC, along with the U.S. Chamber of Commerce, the Business Roundtable and other business groups, filed the lawsuit against the Federal Trade Commission, which in April voted 3-2 to ban common agreements that prevent tens of millions of workers from switching jobs to competitors or starting their own companies.
The final rule bans all new non-compete agreements and requires companies to terminate existing ones, but officials said the agreements may remain in effect for some senior executives.
“This week Americans celebrate their Declaration of Independence from an overly powerful crown prince. Non-compete agreements have existed since before the American Revolution, and our lawsuit seeks to protect strong freedom of contract for future generations of enterprising Americans,” said John Smith, Ryan’s Chief Legal Officer and General Counsel.
The decision came on the heels of a series of Supreme Court decisions that weakened federal agency power, including the overturning of Chevron Deference, a prominent precedent that gave federal agencies the power to interpret ambiguous laws through rulemaking.
The ruling is quite limited, delaying the September 4 rule’s effective date “as applicable to plaintiffs.” The Northern District of Texas said it would “issue a final decision on this case by August 30, 2024.”
“The FTC Act’s language, structure, and history make clear that the FTC lacks substantial rule-making authority regarding unfair competitive practices,” U.S. District Judge Ada Brown wrote.
“The FTC is issuing this rule based on clear authority, supported by statute and case law,” FTC public affairs director Douglas Faller told The Hill.
“We will continue to fight to free hardworking Americans from unlawful non-compete clauses that stifle innovation, stifle economic growth, trap workers and undermine Americans’ economic freedom,” Faller said.
Darryl Josepher, executive vice president and chief counsel for the Chamber of Commerce Litigation Center, called the judge’s decision “a major victory for the Chamber in fighting the government’s micromanagement of business decisions.”
“The FTC’s blanket ban on competing is an illegal power grab that ignores the agency’s constitutional and statutory authority and sets a dangerous precedent that the government knows better than the marketplace. The U.S. Chamber of Commerce will continue to hold the FTC accountable in court,” Josepher said in a statement.
Updated at 6:58pm ET.
