Janice R. Andrews
A federal judge in Texas has stopped the Federal Trade Commission (FTC) from enforcing its plan to ban noncompete deals. This is a major judicial development. US District Judge Ada Brown made the decision that the FTC does not have the power to implement the rule, which was supposed to go into effect on September 4. The FTC’s attempts to get rid of noncompete clauses, which are common in many fields, including technology, have been severely harmed by this ruling.
Judge Brown’s decision was based on the idea that the FTC went beyond what Congress told it to do. She said that the agency was wrong to depend on “inconsistent and flawed empirical evidence” and not look at enough data that supports the use of noncompete agreements. Judge Brown said in her ruling, “The job of an administrative agency is to do what Congress tells it to do, not what the agency thinks it should do.”
Chair Lina M. Khan of the FTC had previously said that noncompete agreements hurt competition, keep wages low, and stop economic growth. It took a 3-2 vote for the agency to decide to stop these deals. Khan stressed that these conditions “rob the American economy of dynamism.” Melissa Holyoak and Andrew Ferguson, two Republican commissioners, were against the ban, though. They said the FTC was going too far with its power.
In July, a lawsuit from the Dallas-based tax services company Ryan LLC led to Judge Brown temporarily stopping the FTC’s rule from going into effect. This was the start of the court fight against the rule. The case said the FTC’s rule was against the Constitution and bad for companies. The US Chamber of Commerce and other business groups quickly joined the case, which made it even harder for the FTC to do its job.
Victoria Graham, a spokeswoman for the FTC, said that the agency is disappointed with the decision and is thinking about filing an appeal. “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 told The Post.
This decision in Texas is not the only one like it. Not long ago, a federal judge in Florida also stopped the rule, but only for the people who were suing. In a different case, though, a judge in Pennsylvania said last month that the FTC does have the power to enforce the ban. These different decisions make it seem like the Supreme Court may have to decide in the end.
Businesses and workers are both very interested in the latest court decisions about noncompete agreements because they could have a big effect on future job contracts in the US.
