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A Texas U.S. District Court judge ruled Tuesday that the Federal Trade Commission cannot enforce its near-total ban on noncompete agreements.
The ban was initially scheduled to take effect on Sept. 4, but now is enjoined.
Judge Ada E. Brown called the ban “unlawful” in the Aug. 20 ruling.
“This decision is a significant win in the Chamber’s fight against government micromanagement of business decisions,” U.S. Chamber of Commerce President and CEO Suzanne P. Clark said in a statement. “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. We remain committed to holding the FTC — and all agencies — accountable to the rule of law, ensuring American workers and businesses can thrive.”
FTC spokesperson Victoria Graham said they were disappointed by the ruling.
“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. We are seriously considering a potential appeal, and today’s decision does not prevent the FTC from addressing noncompetes through case-by-case enforcement actions,” Graham said in a statement.
One Hoosier attorney, Riley Bennett Egloff LLP Partner Don Smith, said the ruling did not surprise him.
“I thought, quite frankly, that the FTC had gone beyond its authority in issuing the ban, so I was not surprised that a court determined that that was beyond their authority,” Smith said.
Smith said he is telling his clients that, for now, they do not need to comply with any part of the ban on noncompete agreements.
The ruling could be appealed to the 5th Circuit Court of Appeals in New Orleans.
The case is Ryan v. FTC, 3:24-cv-986.
There are two other lawsuits challenging the ban.
Those cases in Florida and Pennsylvania are still pending.
The Eastern District of Pennsylvania had ruled in July that the ban was valid and enforceable, refusing to enjoin the ban.
Smith said it is likely the courts in the other two cases will side with the Texas judge’s opinion, but could also issue a stay pending what happens if the case is appealed.
He added the case could make its way before the U.S. Supreme Court.
“At least we can rest assured at this point there is at a nationwide injunction. So that gives us some feeling of relief, at least temporarily,” Smith said.
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