According to the judge, the commission does not possess the authorized authority to enforce the rule.
The efforts of the Federal Trade Commission (FTC) to prohibit noncompete agreements have been thwarted by a federal judge in the state of Texas. The United States District Judge Ada Brown has reportedly made the decision that the agency does not possess the jurisdiction to implement the regulation, which was set to go into effect on September 4th. This information was reported by The Washington Post. According to reports, she stated in her conclusion that the Federal Trade Commission (FTC) only considered “inconsistent and flawed empirical evidence” and did not take into consideration evidence that supported noncompetes. “The role of an administrative agency is to do as told by Congress, not to do what the agency thinks it should do,” according to her statement.
Lina M. Khan, the Chair of the Federal Trade Commission, provided an explanation that “noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism” when the agency gave its approval to the prohibition by a vote of 3-2. Employees would be able to easily relocate to a new job or establish a firm in the same area if companies were prohibited from adding noncompete agreements to contracts. This is because noncompete agreements are frequently utilized in the technology industry. Additionally, Melissa Holyoak and Andrew Ferguson, both of whom are Republicans and serve as commissioners of the Federal Trade Commission, voted against the ban and stated that the agency “overstepped the boundaries of its power.”
Not even a few hours after the Federal Trade Commission (FTC) issued the ban, in July, Brown temporarily halted the rule’s execution in order to evaluate the case that was filed by the Dallas tax services firm Ryan LLC. In the end, the United States Chamber of Commerce and other organizations representing American firms supported the tax firm in their challenge to the newly implemented law regarding noncompete provisions.
“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,” spokesperson for the FTC, Victoria Graham, told The Washington Post. “We are seriously considering a potential appeal, and today’s decision does not prevent the FTC from addressing noncompetes through case-by-case enforcement actions.”
There was also a federal judge in Florida who blocked the order last week, but this time it was solely for the plaintiffs in the action. While this was going on, another judge in Pennsylvania made a decision last month that the agency has the ability to enforce the ban in a different case that was brought up by a tree-care firm in the state. It is still possible to file an appeal in each of the three cases, and some of them might even be heard by the Supreme Court.