Federal judge partially blocks FTC noncompete ban: Reports

A federal judge in Texas partially blocked a ban issued by the U.S. Federal Trade Commission that would bar employees from taking jobs with competitors, according to multiple reports. 

The ban was supposed to go into effect on September 4. 

Judge Ada Brown, of the U.S. District Court for the Northern District of Texas, postponed the effective date on Wednesday, according to Reuters. 

In her ruling, Brown said that the FTC lacked the power to adopt broad rules prohibiting practices that it deemed unfair methods of competition. 

"While this order is preliminary, the Court intends to rule on the ultimate merits of this action on or before August 30, 2024," she wrote, according to an NPR report. 

FILE - Signage outside the Federal Trade Commission (FTC) headquarters in Washington, DC, US, on Friday, Feb. 17, 2023. (Ting Shen/Bloomberg via Getty Images)

Who will be impacted? 

The noncompete agreement ban was issued by the FTC back in April and about 30 million people would have been subject to the restrictions. 

"Noncompete clauses keep wages low, suppress new ideas and rob the American economy of dynamism," FTC Chair Lina Khan said. "We heard from employees who, because of noncompetes, were stuck in abusive workplaces."

Some doctors, she added, have been prevented from practicing medicine after leaving practices.

FTC ban gets pushback

After the sweeping measure was passed, the U.S. Chamber of Commerce said that it would file a lawsuit to block the rule. It accused the FTC of overstepping its authority. 

"Noncompete agreements are either upheld or dismissed under well-established state laws governing their use," said Suzanne Clark, the chamber’s CEO. "Yet today, three unelected commissioners have unilaterally decided they have the authority to declare what’s a legitimate business decision and what’s not by moving to ban noncompete agreements in all sectors of the economy." 

Business groups have criticized the measure as casting too wide a net by blocking nearly all noncompetes. They argued that highly paid executives are often able to win greater pay in return for accepting a noncompete. 

Noncompete agreements are banned in three states, including California, and some opponents of noncompetes argue that California’s ban has been a key contributor to that state’s innovative tech economy. 

The Associated Press contributed to this report. This story was reported from Los Angeles.