Federal Judge Blocks FTC Ban on Non-Compete Agreements

A federal judge has blocked the Federal Trade Commission’s (FTC) near-total ban on non-compete agreements, which was scheduled to take effect next month. In a ruling on August 20th, U.S. District Judge Ada Brown in Dallas sided with the U.S. Chamber of Commerce and a Texas-based tax firm that challenged the measure. Judge Brown concluded that the FTC lacked the authority to implement the ban and described the rule as “unreasonably overbroad without a reasonable explanation.” This decision represents a setback for the FTC’s efforts to restrict non-compete clauses.

The ruling adds to the ongoing judicial debate over the FTC’s regulatory powers. Previously, a federal judge in Pennsylvania had supported the FTC’s rule, indicating a division within the courts on this issue. Brown had previously granted a temporary injunction on implementing the rule in Texas. The latest ruling makes the injunction permanent and applies nationwide. The FTC expressed disappointment in the decision and announced its intention to consider an appeal, stating that the agency remains committed to challenging non-compete agreements through potential future legal actions.

The U.S. Chamber of Commerce applauded the ruling as a significant victory against overreach by the government in business regulation. The Chamber argued that the FTC’s proposed rule was an unlawful expansion of regulatory power that could disadvantage American workers, businesses, and the economy.