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<\/div>\nA federal judge delayed implementation of the US Federal Trade Commission\u2019s near-total ban on noncompete agreements, the first salvo in the high-stakes legal fight over how much freedom workers should have to switch jobs within an industry.<\/p>\n
US District Judge Ada Brown in Dallas sided with the US Chamber of Commerce and a Texas-based tax firm that claimed the agency lacks authority to craft rules defining unfair methods of competition. The groups warned the unprecedented rule would invalidate 30 million employment contracts in a move that \u201camounts to a vast overhaul of the national economy.\u201d<\/p>\n
The ban was set to take effect Sept. 4, but it will now be on hold until August while the judge considers the merits of the lawsuit by the groups that seek to permanently strike the rule from the books.<\/p>\n
Brown said in her ruling Wednesday<\/a> that the challenge to the measure is \u201clikely to succeed on the merits,\u201d and that the public interest weighed in favor of temporarily blocking the rule.<\/p>\n The FTC approved the new rule in April, arguing that noncompete agreements unfairly block workers from switching jobs and undermine labor competition. The ban is backed by labor organizations AFL-CIO and the Service Employees International Union, Democratic senators and attorneys general from California, Illinois and 17 other states.<\/p>\n Related:<\/strong> FTC Noncompete Ban Includes Key Revisions, But Faces Uncertain Future<\/a><\/p>\n \u201cThe FTC stands by our clear authority, supported by statute and precedent, to issue this rule,\u201d Douglas Farrar, a spokesperson for the agency, said in a statement. \u201cWe will keep fighting to free hardworking Americans from unlawful noncompetes, which reduce innovation, inhibit economic growth, trap workers, and undermine Americans\u2019 economic liberty.\u201d<\/p>\n The rule would ban most noncompete agreements, including those of senior executives. Existing agreements for executives who earn more than $151,164 a year in a \u201cpolicy making position\u201d would remain in place under the FTC\u2019s ban, while those binding lower-level workers would become unenforceable.<\/p>\n Business groups argue the FTC\u2019s rule is overly broad and limits the ability of companies to protect confidential information. The ban would impact businesses and people across the workforce \u2014 everyone from doctors to tax professionals to hair stylists \u2014 and shift the balance of power between bosses and staff.<\/p>\n \u201cThis ruling is a big win in the Chamber\u2019s fight against government micromanagement of business decisions,\u201d the Chamber of Commerce\u2019s chief counsel Daryl Joseffer said in a statement. \u201cThe FTC\u2019s blanket ban on noncompetes is an unlawful power grab that defies the agency\u2019s constitutional and statutory authority and sets a dangerous precedent where the government knows better than the markets.\u201d<\/p>\n About one in five Americans is bound by a noncompete agreement, a March 2022 Treasury Department report found<\/a>. In some industries, including technology and health care, it\u2019s even higher. Studies found as many as 45% of primary care physicians and 35% to 45% of tech workers are bound by noncompete clauses.<\/p>\n President Joe Biden supports the ban and his administration has made competition issues a key part of his economic policy.<\/p>\n Brown\u2019s decision could be appealed to the conservative US 5th Circuit Court of Appeals in New Orleans. The appeals court has become a favorite for conservative opponents of Biden\u2019s policies related to federal regulatory power, guns, abortion and social media regulation.<\/p>\n The case is Ryan v. Federal Trade Commission, 3:24-cv-00986, US District Court, Northern District of Texas (Dallas).<\/p>\n Photo: The Federal Trade Commission headquarters in Washington, DC. Photographer: Ting Shen\/Bloomberg<\/em><\/p>\n Topics<\/span> Legislation<\/a> <\/p>\n<\/p><\/div>\n Was this article valuable?<\/p>\n<\/p><\/div>\n