Non-Competes No-Nos on Hold — Texas Judge Blocks FTC Decision

A tax service company in Dallas, Texas led a suit against the Federal Trade Commission’s (FTC) upcoming ban non-compete agreements. The ban was to go into effect on September 4th.

Ryan and the others joining the suit, the U.S. Chamber of Commerce, the Business Roundtable, the Texas Association of Business and other big businesses, say the FTC overstepped its boundaries when it declared all non-competes to be unfair and anti-competitive.

Federal judge, Ada Brown of the U.S. District Court for the Northern District of Texas heard the case and agreed with Ryan and has put the non-compete ban on hold. In her ruling, Judge Brown said Ryan and the others are likely to prevail when she does her final ruling in August.

“While this order is preliminary, the Court intends to rule on the ultimate merits of this action on or before August 30, 2024,” she wrote and continued, “The FTC lacks substantive rulemaking authority with respect to unfair methods of competition.”

One in five of us — or about 30 million people — have signed non-compete agreements. The reasons vary but Ryan’s attorney, John Smith argued the ban could put a company’s confidential information at risk. A competitor could grab a valuable employee who has that information, and all that training, and use that information to unfairly compete against them.

“The court’s decision is an important step toward invalidating a rule that burdens not only Ryan, but also Ryan’s clients, and multitudes of employers and employees across America,” Smith said.

FTC Chair Lina Khan disagrees with the judge’s decision.

“The freedom to change jobs is core to economic liberty and to a competitive, thriving economy,” Khan said when the suit was first filed. “Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand.”

The exception in the rule is non-compete agreements for senior executives with existing non-compete agreements and according to FTC numbers, that’s about 1% of those who’ve signed a non-compete.

The FTC thinks once workers are free of the non-compete agreement and the ban is in effect, it will generate wage increases of close to $300 billion a year and create 8,500 new jobs. Ryan and the others joining the company’s suit disagree with that assessment.

Source link: NPR —

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