Texas Judge Sets Aside Ban on Noncompete Agreements

By: Cris Collingwood

A federal judge in Texas set aside the FTC’s ban on noncompete agreements, ruling that the agency overstepped its authority and failed to justify such a sweeping prohibition, though the FTC may still pursue case-by-case enforcement. In an interview with Lehigh Valley Business, Jonathan Landesman, chair of Cohen Seglias’ Labor & Employment Group, called the rule “the most dramatic change in the law” he has seen in 25 years, noting that it unravels centuries of precedent and predicted strong legal challenges from business groups like the U.S. Chamber of Commerce.

A federal judge in Texas on Tuesday set aside the Federal Trade Commission’s (FTC) ban on employment noncompete agreements.

U.S. District Judge Ada Brown in Dallas said the FTC, which enforces federal antitrust laws, does not have the authority to ban practices it deems unfair methods of competition by adopting broad rules, according to Reuters.
Brown had temporarily blocked the rule in July while she considered a bid by the U.S. Chamber of Commerce and tax service firm Ryan to strike it down entirely. The rule was set to take effect Sept. 4.

“This decision is a significant win in the Chamber’s fight against government micromanagement of business decisions,” said U.S. Chamber of Commerce President and CEO Suzanne P. Clark, in a statement on the chamber’s website. “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. We remain committed to holding the FTC and all agencies accountable to the rule of law, ensuring American workers and businesses can thrive.”