The Federal Trade Commission (FTC) banned non-compete clauses in April, saying the agreements — which prohibit a company’s employees from working for a competitor or starting a competing business for a specified time period after leaving employment — depress wages and prevent Americans from starting latest businesses.
Now a U.S. District Judge in Dallas has blocked the ban, about two weeks before it was set to go into effect on September 4.
FTC Chairwoman Lina Khan. Photo: Tom Williams/CQ-Roll Call, Inc. via Getty Images
U.S. District Judge Ada Brown in Dallas he ruled on Tuesday that the FTC had no authority to ban noncompetes, making the April rule an “illegal agency action.” The judge called the rule “arbitrary and capricious” in its decision and found that the FTC had didn’t prove why it wanted a “blanket ban” on non-compete clauses moderately than specific prohibitions on harmful clauses.
This implies that the non-compete clause won’t apply nationwide. Non-compete clauses apply about 30 million Americansin keeping with the FTC.
The FTC said it was “disappointed” by the decision.
“We are seriously considering a potential appeal” he stated FTC spokesman.
The judge sided with the plaintiffs, including the U.S. Chamber of Commerce, the Business Roundtable and Ryan LLC, a tax law firm. They sued the FTC on April 23, on the same day the commission announced a non-compete order.
“The Federal Trade Commission’s decision to ban employer noncompete agreements across the economy is not only illegal, it is also a blatant power grab that will undermine the ability of American businesses to remain competitive.” — Suzanne P. Clark, president and CEO, U.S. Chamber of Commerce he stated then.
Chamber he said that non-compete clauses might help firms protect investments in worker training, research and development, and that he opposes “government micromanagement” by opposing the provision.
On the other hand, the FTC found that banning non-compete clauses would open up latest opportunities for American employees and result in the creation of 8,500 latest businesses per yr.
According to the projections, employee wages would increase by $524 per yr, 17,000 to 29,000 latest patents could be filed annually and health care costs would fall by as much as $194 billion over the next ten years. FTC estimates.