Federal Trade Commission (FTC) prohibition of non-compete agreements It was supposed to go into effect on September 4, but a Texas court has sided with plaintiffs seeking to block the rule, delaying its implementation. Back in April, the FTC banned widespread non-competes used in the technology industry driving innovation and protecting workers’ rights and wages for years. Many companies are surprisingly unhappy with the agency’s rule NPR notes that Dallas tax services firm Ryan LLC sued the FTC within hours of its announcement. The US Chamber of Commerce and other American business groups eventually joined the lawsuit.
“Anti-competitive provisions keep wages down, stifle new ideas and rob the American economy of dynamism,” FTC Chairwoman Lina M. Khan said when the rule was announced. They prevent workers from moving to another company or starting their own business in the same industry, so they can be stuck in a lower-paying job or working in an environment they don’t like. But Chamber of Commerce general counsel Daryl Joseffer called the ban an attempt by the government to micromanage business decisions. Bloomberg.
“The FTC’s ban on noncompetes is an illegal power grab that violates the agency’s constitutional and statutory authority and sets a dangerous precedent that government knows better than markets,” Josepher said. The FTC disagrees and says NPR its “authority is supported by both statute and precedent.”
U.S. District Judge Ada Brown, appointed by former President Donald Trump, wrote in her decision that “the text, structure, and history of the FTC Act suggest that the FTC lacks substantial rulemaking authority regarding unfair competition practices.” Brown also said the plaintiffs “may be able to succeed” in overturning the rule and that it is in the public interest to grant the plaintiff’s motion for a preliminary injunction. The judge added that the court would rule “on or before August 30 on the final merits of this action.”
