Noncompetes are sticking around

A Texas judge on Tuesday blocked a ban on noncompete agreements, which was set to take effect on September 4. 

Background: In April, the Federal Trade Commission (FTC) announced a rule banning U.S. businesses from issuing noncompete agreements to employees and invalidating existing ones.

• The logic: The FTC argued that noncompetes prevent workers from taking new jobs and starting new businesses, estimating that the ban would lead to 8,500 additional businesses forming annually.

• Hours after the announcement, the U.S. Chamber of Commerce sued the FTC.

• “If the FTC can regulate noncompete agreements, then they can decide to regulate or even ban any other business practice,” the Chamber stated. 

The big picture: An estimated 30 million American workers are currently bound by noncompetes. 

What’s happening: On Tuesday evening, Judge Ada Brown sided with the Chamber of Commerce, blocking the ban.

• She noted the FTC lacks the authority to enact it and described the ban as “unreasonably overbroad without a reasonable explanation.”

• “This decision is a significant win in the Chamber’s fight against government micromanagement of business decisions,” said Chamber of Commerce CEO Suzanne Clark. 

Looking ahead: The FTC is considering an appeal, according to spokesperson Victoria Graham.

• “[T]oday’s decision does not prevent the FTC from addressing noncompetes through case-by-case enforcement actions,” she added.

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