The FTC’s noncompete agreements ban has been struck down

The FTC’s noncompete agreements ban has been struck down

Image: Cath Virginia / The Verge; Getty Images

A federal judge has blocked the Federal Trade Commission’s ban on noncompete agreements that make it difficult for workers to join their employers’ rivals or launch competing businesses. The ruling prevents the FTC’s ban on noncompete agreements from taking effect on September 4th, though the agency could still appeal the decision.

On Tuesday, US District Judge Ada Brown in Dallas, Texas ruled that the antitrust agency exceeded its statutory authority to ban practices related to unfair methods of competition, saying the noncompete agreements ban is “unreasonably overbroad without a reasonable explanation,” and would “cause irreparable harm.” Brown’s decision now stops the FTC from blocking noncompetes nationwide after initially delaying the ban with a preliminary injunction in July.

According to the FTC, around 30 million people — one in five Americans — have signed noncompete agreements. A federal judge in Pennsylvania had previously declined to block the ban in a separate case last month.

“We are seriously considering a potential 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,” FTC spokesperson Victoria Graham said in a statement to The Verge. ”We are seriously considering a potential appeal.”

If the FTC does push ahead with an appeal, it would go to the Fifth Circuit Court of Appeals to be heard. Appeals on district court decisions are often a lengthy process, with the FTC’s appeal against Microsoft’s Activision Blizzard acquisition still pending a result. In the meantime, the FTC will have to challenge noncompetes via case-by-case enforcement actions.

The ruling upholds a lawsuit that Tax firm Ryan LLC filed in April — later backed by the US Chamber of Commerce and Business Roundtable — to challenge the noncompete agreements ban, arguing that it would make it difficult for companies to retain talent. When the FTC voted 3-2 in support of the ban, the agency said it would allow for more than 8,500 new businesses to be made each year.