FTC’s Ban on Noncompete Agreements Held in Limbo as Federal Judge Puts Implementation on Hold

A federal judge in New York has put on hold the implementation of a ban on noncompete agreements for workers that was set to take effect on September 4. Judge Ada Brown of the U.S. District Court for the Northern District of Texas stated that while the delay is preliminary, a final ruling on the matter is expected by August 30, 2024. The ban, which was approved by the Federal Trade Commission (FTC) in April, prohibits employers from enforcing noncompete clauses in most current employment agreements and also prohibits companies from including them in future agreements.

Following the FTC’s approval of the ban, Ryan LLC, a tax services and software provider in Texas, as well as the U.S. Chamber of Commerce and other business groups, filed lawsuits against the agency. The FTC estimates that about 30 million people, or one in five U.S. workers, are currently bound by noncompete agreements in their jobs. The agency believes that these agreements impede job mobility, reduce wages, hinder innovation, prevent entrepreneurs from starting businesses, and undermine fair competition.

The U.S. Chamber of Commerce has welcomed the court’s preliminary injunction as a victory, calling the FTC’s ban on noncompete agreements an overreach that goes against the agency’s legal authority. However, an FTC spokesperson has stated that the agency will continue to enforce the ban on noncompete agreements on a case-by-case basis, despite the court’s delay in implementation