Judge Hits Partial Pause on FTC Noncompete Ban

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(ConservativeHub.com) – A federal judge has issued a partial preliminary injunction on an FTC noncompete ban.

On Wednesday, July 3, a federal judge awarded a preliminary injunction against the Federal Trade Commission’s (FTC) national ban on noncompete agreements it issued in April. The injunction, however, does not apply nationwide — only for the U.S. Chamber of Commerce and a number of other groups involved in the lawsuit.

Ryan LLC, a Dallas-based tax firm, was joined by the Business Roundtable, the Chamber of Commerce, and several other business groups in a lawsuit it filed against the FTC.

At the heart of the lawsuit is a decision the FTC made, after a 3-2 vote, to ban agreements preventing tens of millions of employees from leaving their current employers to start a competing business or work for competitors.

The rule bans companies from issuing new noncompetes and requires existing agreements to be discarded. However, the agency noted the agreements could stand for some senior executives.

Last week’s ruling comes amid a series of Supreme Court rulings weakening the powers of federal agencies, including SCOTUS’s decision to overrule the Chevron deference, which has historically determined how federal agencies handle ambiguities in certain laws.

In her ruling, U.S. District Judge Ada Brown wrote that the FTC Act’s “text, structure, and history” reveal the agency “lacks substantive rulemaking authority” regarding “unfair methods of competition.”

However, the director of the FTC’s Office of Public Affairs, Douglas Farrar, explained the agency “stands by” its authority supported by precedent and statute to implement the noncompete rule.

Farrar added that the FTC would continue “fighting to free hardworking Americans” from what he described as “unlawful noncompetes,” which he blamed for undermining economic liberation, harming innovation and economic growth, and trapping workers.

A final ruling is expected by August 30, just days before the rule is meant to take effect.

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