Judge delays ban on noncompete agreements for employees

New York
CNN
 — 

A federal judge on Wednesday delayed a ban noncompete agreements for workers from taking effect on September 4.

“While this order is preliminary, the Court intends to rule on the ultimate merits of this action on or before August 30, 2024,” wrote Judge Ada Brown of the U.S. District Court for the Northern District of Texas.

The ban, which prohibits employers from enforcing noncompete clauses in most existing employment agreements and bans companies from including them in all future ones, was approved by the Federal Trade Commission in April.

Within a day of the FTC approval, the agency was sued by Ryan LLC, a tax services and software provider based in Texas, and, separately, by the US Chamber of Commerce and other business groups.

The FTC estimates that 30 million people — one in five US workers — are bound by a noncompete clause in their current jobs. For most of them, the agency asserts that such a clause restricts them from freely switching jobs, lowers wages, stifles innovation, blocks entrepreneurs from starting new businesses and undermines fair competition.

The US Chamber of Commerce, in a statement, characterized the preliminary injunction as a win. “The FTC’s blanket ban on noncompetes is an unlawful power grab that defies the agency’s constitutional and statutory authority and sets a dangerous precedent where the government knows better than the markets. The U.S. Chamber will continue to hold the FTC accountable in court,” the group’s chief counsel Daryl Joseffer said.

In response to the order, FTC spokesperson Douglas Farrar said, “The FTC stands by our clear authority, supported by statute and precedent, to issue this rule. We will keep fighting to free hardworking Americans from unlawful noncompetes, which reduce innovation, inhibit economic growth, trap workers, and undermine Americans’ economic liberty.”

In the meantime, the court’s order does not preclude the FTC from taking enforcement actions against noncompete agreements on a case-by-case basis.

This is a breaking news story and will be updated.