US federal judge overturns FTC's ban on non-compete agreements

TapTechNews August 21, a federal judge in the US state of Texas ruled on Tuesday that the Federal Trade Commission's (FTC) rule banning non-compete agreements exceeded its authority and therefore overturned the rule.

The rule, which was originally set to take effect on September 4, aims to prohibit employers from requiring employees to sign non-compete agreements to prevent them from switching to rival companies. Tax firm Ryan LLC based in Dallas, the US Chamber of Commerce, the Business Roundtable, and other business groups sued to block the rule from taking effect, claiming that the FTC overstepped its authority and that this would make it harder for companies to retain talent.

In a 27-page judgment, US District Court Judge Ada Brown held that the FTC lacks the legal power to promulgate this rule and called the rule 'arbitrary and capricious'. 'The FTC's act of promulgating this rule is an illegal administrative act,' Judge Brown wrote in the judgment.

FTC spokeswoman Victoria Graham said: 'We are disappointed by Judge Brown's ruling and will continue to work to stop non-compete agreements that limit the economic freedom of hardworking Americans, hinder economic growth, limit innovation, and depress wages. We are seriously considering a possible appeal, and today's ruling will not prevent the FTC from dealing with non-compete agreements through individual enforcement actions.'

According to TapTechNews' understanding, non-compete agreements usually appear in employment contracts and require employees not to join rival companies or engage in similar work within a certain period after leaving. This agreement has long been controversial. Supporters believe it can protect the business secrets of enterprises, while opponents believe it limits the employment freedom of employees and may lead to a decrease in wage levels.