Federal judge blocks FTC’s noncompete order

A federal judge in Texas on Tuesday blocked a U.S. Federal Trade Commission (FTC) rule that sought to ban noncompete agreements commonly signed by employees. U.S. District Judge Ada Brown found that the FTC lacked the authority to enforce such a broad rule under federal antitrust laws.

The rule, which was originally set to go into effect Sept. 4, was temporarily put on hold by Brown in July after a challenge from the U.S. Chamber of Commerce and tax consulting firm Ryan. Brown explained in her ruling that even assuming the FTC had the authority to implement the rule, the agency had not provided enough evidence to justify an outright ban on noncompetes.

FTC spokeswoman Victoria Graham expressed disappointment and said the agency was considering a potential appeal. Chamber of Commerce President Suzanne Clark praised the decision as a significant victory over government micromanagement. The Democratic-controlled FTC approved the rule in May, arguing that noncompetes unfairly restrict competition and stifle wages and worker mobility. But business groups contend the ban could jeopardize trade secrets and other confidential information.

(Based on information from the agency.)