A judge for the U.S. District Court for the Northern District of Texas, Dallas Division, ruled on Aug. 20 that the Federal Trade Commission (FTC) lacks the authority to enforce its ban on noncompete agreements. The judge found the FTC’s near-total ban “unreasonably overbroad without a reasonable explanation” and sided with the U.S. Chamber of Commerce and the tax firm Ryan LLC.
The ruling prevents the ban, which was set to take effect on Sept. 4, from being implemented or enforced. The FTC, arguing that noncompete agreements unfairly restrict workers, finalized the rule to implement the ban in April. Noncompete agreements previously were governed by state laws prior to the rule.
The judge’s decision is a setback for the FTC’s broader efforts to combat anticompetitive practices, particularly in the healthcare sector. The American Hospital Association welcomed the ruling, while the FTC expressed disappointment and is considering an appeal. Despite the ruling, the FTC is still able to challenge noncompete agreements on a case-by-case basis.
