A sweeping federal ban on noncompetes — which was set to go into effect for tens of millions of Americans across the country on Sept. 4 — is now permanently on hold.
In a ruling Tuesday, a federal judge in Texas upheld a challenge to the FTC’s rule banning non-competes, saying the state agency lacks authority to impose the ban.
An estimated 30 million Americans – 1 in 5 workers – are employed under non-compete agreements in industries ranging from technology to fast food. The FTC claims the agreements stifle workers’ ability to change jobs and earn higher wages.
The FTC rule would have meant that the applicant for a new job could not be forced to sign a non-compete. For workers with existing contracts, non-compete clauses would no longer be enforceable.
The decision by U.S. District Judge Ada Brown means those changes are effectively blocked.
The seal of the Federal Trade Commission on the wall of the organizations headquarters in Washington on May 20, 2024.
Bloomberg via Getty Images
In a statement to ABC News, FTC spokeswoman Victoria Graham said the agency is “seriously considering a potential appeal” of the decision.
“We are disappointed by Judge Brown’s decision and will continue to fight to stop non-competes that limit the economic freedom of hard-working Americans, inhibit economic growth, limit innovation and lower wages,” Graham said.
The lawsuit was filed by the U.S. Chamber of Commerce along with a Texas tax firm, which argued that the rule was too broad and that the FTC exceeded its authority.
“This decision is a significant win in the Chamber’s fight against government micromanaging of business decisions. A sweeping ban on non-compete clauses by the FTC was an unlawful expansion of power that would have put American workers, businesses and our economy at a competitive disadvantage,” US Chamber of Commerce President and CEO Suzanne Clark said in a statement.