Federal judge issues partial halt to FTC ban on noncompetes
A federal court in Texas partially blocked the Federal Trade Commission's ban on noncompete contracts, pending another court date.
Judge Ada E. Brown ruled on Wednesday that the FTC overstepped its regulatory authority, in violation of the Administrative Procedure Act. In her preliminary injunction against the FTC, Brown said there is a likelihood the agency’s decision will be, at least in part, overturned.
For now, the ruling does not fully stop the ban on noncompetes from going into effect. However, at least for now, the plaintiffs who brought the case will not have to comply with the FTC, having successfully argued the agency’s decision is arbitrary and capricious.
The FTC voted 3-2 to ban noncompete clauses in employment contracts in April, and the regulation was expected to go into effect later this year. All for-profit businesses would be impacted.
A court hearing on the fate of noncompetes will take place before the end of August. After that ruling, any decision can be appealed to a higher court. That decision by the federal court in Texas, and any subsequent supreme court appeals, will likely not impact state regulations that already ban such contracts, such as a law in Maryland that forbids their use for all healthcare professionals.
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.