Non-competes ban hits first roadblock as federal judge rules against it

WICHITA FALLS, Texas – A Texas federal judge has ruled in favor of the plaintiffs that sued the Federal Trade Commission in April after the Commission ruled to ban most non-compete agreements. The new ruling, though just a preliminary one, bars the FTC from enforcing the ban on the U.S. Chamber of Commerce, tax prep firm Ryan LLC and several other Texas businesses – all of whom sued the FTC soon after the ban was announced.

Judge Ada Brown ruled the FTC overstepped its authority with its ruling against non-competes, which the plaintiffs had also argued. The preliminary ruling will need another ruling though before Sept. 4 (the date the FTC ban is set to go into effect) for it to be official.

Brown ruled specifically that the ban exceeds the agency’s authority, is unconstitutional and is “arbitrary and capricious.”

According to CNN, there is likely to be much effort between now and the start of September to convince the judge to block the ban nationwide.

In April, the FTC banned for-profit employers from issuing new non-competes to any employee, as well as banning existing non-competes when the rule becomes effective, which is set 120 days after it’s published in the Federal Register – or early September.

The one exception to the ban is with senior executives, who the FTC defines as making more than $151,164 per year and who are in a “policy-making position.” The rule allows existing non-competes to remain in place for this group but still forbids the creation of new non-competes.

The FTC first proposed the rule in January 2023, which was subject to a 90-day comment period. It received 26,000 comments, 25,000 of which it said were in support of the ban.

Non-compete agreements have long been active in the furniture industry. Furniture Today spoke with several industry executives in April to get their opinions on the ban. Check them out here.

See also:

  • FTC bans non-compete agreements in new ruling
  • FTC looks to tamp down these 7 deceptive review practices with new rule

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