A federal judge in Texas granted a preliminary injunction against the Federal Trade Commission’s (FTC) ban on noncompete agreements.
The ban was scheduled to take effect Sept. 4 but will now be postponed until a challenge from Ryan LLC, a Texas tax services firm, can be resolved. Judge Ada Brown of the U.S. District Court for the Northern District of Texas, where the lawsuit was filed, ruled that the plaintiffs are likely to succeed on the merits of the case, paving the way for the injunction.
The lawsuit seeks to overturn the final rule the FTC published in April that prohibits noncompete agreements between all businesses and their employees in most cases. Business groups and trade associations, including FEDA and the National Association of Wholesaler-Distributors (NAW), have opposed the noncompetes ban because it limits the ability of businesses to protect trade secrets and competition.
“The FTC’s ban on non-compete agreements does not serve the interests of businesses, workers or consumers and we commend the court for blocking it until a final decision is made,” Brian Wild, chief government relations officer for NAW, said in a statement. “There is substantial evidence that non-compete agreements are beneficial — they enable employers to invest in their workforce, protect sensitive business information and maintain vital business relationships.”
The U.S. Chamber of Commerce, which had filed a motion in the case requesting the preliminary injunction, called the ruling a “big win” in the fight against government micromanagement of business decisions. “The FTC’s blanket ban on noncompetes is an unlawful power grab that defies the agency’s constitutional and statutory authority and sets a dangerous precedent where the government knows better than the markets,” Daryl Joseffer, executive vice president and chief counsel for the chamber, said in a statement.