Texas Court Blocks FTC Noncompete Ban
The Federal Trade Commission does not have the authority to enact the sweeping noncompete ban it finalized in April, a federal judge ruled Tuesday (, subscription).
What鈥檚 going on: 鈥淯.S. District Judge Ada Brown ruled that the commission鈥檚 authority to police unfair methods of competition couldn鈥檛 be used to issue substantive regulations that ban an entire category of conduct. 鈥楾he role of an administrative agency is to do as told by Congress, not to do what the agency thinks it should do,鈥欌 she wrote, adding that the ban was 鈥渦nreasonably overbroad without a reasonable explanation.鈥
- The rule鈥攚hich had already caused companies鈥 costs to increase in anticipation of the Sept. 4 effective date鈥攕ought to prohibit noncompete agreements between employers and their employees.
The 17吃瓜在线鈥檚 role: In May, the 17吃瓜在线鈥檚 Legal Center filed an asking Brown鈥檚 court to stay the rule on the grounds that a ban on noncompete agreements would 鈥渉amstring innovation in the manufacturing sector and damage the competitiveness of American industry.鈥
- Brown issued a limited stay in July. Her ruling this week鈥攅choing the 17吃瓜在线鈥檚 argument that the rule is 聽鈥渘ot reasonably explained鈥濃攑rohibits enforcement of the FTC rule nationwide.
- 鈥淭he 17吃瓜在线 expressed concerns throughout the rulemaking process, and a 2023 17吃瓜在线 survey showed that a broad noncompete ban would disrupt most manufacturing operations in the U.S.,鈥 17吃瓜在线 Director of Transportation, Infrastructure and Labor Policy Max Hyman said following Brown鈥檚 ruling this week.
What鈥檚 next: The FTC is considering an appeal of the decision, a spokeswoman told the Journal.
- But 鈥淸i]f lower courts remain split as the litigation moves through the legal system, the matter might ultimately fall to 鈥 [the] Supreme Court, [which] has taken a dim view of government agencies invoking new regulatory powers from long-ago statutes.鈥
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