A federal judge in the U.S. District Court for the Northern District of Texas has postponed the implementation of a ban on noncompete agreements for workers, originally scheduled to take effect on September 4. The ban, approved by the Federal Trade Commission (FTC) in April, prohibits employers from enforcing noncompete clauses in existing employment agreements and prohibits including them in future agreements.
The FTC estimates that one in five US workers, approximately 30 million people, are bound by noncompete agreements that limit their ability to switch jobs freely, reduce wages, stifle innovation, block entrepreneurs, and undermine fair competition. However, shortly after the FTC approval, the agency was sued by Ryan LLC, a tax services and software provider from Texas, as well as the US Chamber of Commerce and other business groups.
The US Chamber of Commerce celebrated the preliminary injunction as a victory, calling the FTC’s ban on noncompetes an “unlawful power grab.” The FTC remains committed to its authority to issue the rule, citing the benefits of freeing workers from detrimental noncompete agreements. However, this delay could have negative consequences for workers who are currently bound by such agreements and may hinder their ability to seek better employment opportunities or negotiate fairer wages.
Despite this setback, it is important to note that this decision does not prevent the FTC from taking enforcement actions against noncompete agreements on a case-by-case basis. This ongoing news story will be updated as new information becomes available.