The FTC’s ban on noncompete agreements – which was to take effect for tens of millions of Americans nationwide on September 4 – is now permanently on hold. In a ruling Tuesday, a federal judge in Texas upheld a challenge to the FTC’s rule banning noncompetes. US District Judge Ada Brown said the government agency lacks the authority to put the ban into effect.
An estimated 30 million Americans – 1 out of every 5 workers – work within noncompete agreements in industries ranging from tech to fast food. The FTC argues the agreements stifle workers’ ability to switch jobs and earn higher wages. The rule would have meant that anyone applying for a new job could not be forced to sign a noncompete. Also, for workers with existing agreements, noncompetes would no longer be enforceable.
This rule was first proposed in January 2023, with many employees speaking in favor of the proposal. The FTC said it expected the ban to increase workers’ wages by up to $488 billion over the next decade. Additionally, the average worker’s earnings rise an estimated $524 per year. However, the decision from Judge Brown means those changes are effectively on hold.
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Texas Judge Holds Off FTC’s Noncompete Agreement Ban
Furthermore, FTC spokesperson Victoria Graham said the agency is “seriously considering a potential appeal” of the decision. “We are disappointed by Judge Brown’s decision and will keep fighting to stop noncompetes that restrict the economic liberty of hardworking Americans, hamper economic growth, limit innovation, and depress wages,” she said.
The lawsuit was filed by the U.S. Chamber of Commerce along with a Texas tax firm. The firm argued that the rule was too broad and the FTC overstepped its authority.
“This decision is a significant win in the Chamber’s fight against government micromanagement of business decisions. A sweeping prohibition of noncompete agreements by the FTC was an unlawful extension of power that would have put American workers, businesses, and our economy at a competitive disadvantage,” U.S. Chamber of Commerce President and CEO Suzanne Clark said in a statement.
In a statement from the White House, Press Secretary Karine Jean-Pierre says the current administration will work to fight this ban block.
“Special interests and big corporations worked together today to prevent nearly 30 million hardworking Americans from being able to get better jobs or start small businesses. The Biden-Harris Administration will keep fighting to empower workers to choose where they work, to start a business, and to get the pay they deserve, and continues to support the Federal Trade Commission’s ban on noncompete agreements.”
The length of the upholding of the ban remains unknown.