Judge delays ban on non-compete agreements for small number of employers

New York

A federal judge on Wednesday temporarily delayed a ban on non-compete agreements for a handful of employers. On September 4th.

Unless the judge issues a different ruling. Prior to that date, the ban on non-compete agreements was These rules will go into effect for most companies in the United States, but they will find out later this summer whether these rules are still in effect.

“Although this is a preliminary order, the Court intends to rule on the final merits of this action on or before August 30, 2024,” wrote Judge Ada Brown of the U.S. District Court for the Northern District of Texas.

There will likely be a concerted effort between now and the end of August to persuade Judge to prevent ban Nationally, according to Jesse Coleman, a partner at the Houston law firm Seyfarth Shaw, who represents SHRM, the Society for Human Resource Management.

the BanIn April, the Federal Trade Commission approved a new rule that prohibits employers from imposing non-compete clauses in most existing employment agreements and prohibits companies from including them in all future agreements.

Within a day of the FTC’s approval, a lawsuit was filed against the agency by Ryan Company Limiteda Texas-based tax services and software company, and, separately, by the U.S. Chamber of Commerce and other business groups.

Wednesday’s order is limited to the preliminary injunction. Only the plaintiff (Ryan Ltd.) and The plaintiffs-intervenors, namely: The U.S. Chamber of Commerce, the Business Roundtable, the Texas Business Association, and the Longview Chamber of Commerce. However, it does not extend to “Companies that are members of those groups.”[T]“The Court declined to extend injunctive relief to the intervening plaintiffs,” the judge wrote.

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Although the court indicates its belief that the FTC lacks rulemaking authority to issue a non-compete ban, Judge Coleman said the United States has declined to issue a nationwide ban at this time.

Part of the reason, according to the order, appears to be that the intervening plaintiffs did not provide the court with sufficient briefing on why the ban should be applied more broadly.

The Federal Trade Commission estimates that 30 million people—one in five U.S. workers—are bound by the law. non-compete clause In their current jobs, the agency argues that such a provision restricts their ability to change jobs freely, lowers wages, stifles creativity, prevents entrepreneurs from starting new businesses, and undermines fair competition.

The U.S. Chamber of Commerce called the limited preliminary injunction a victory in a statement. “The FTC’s sweeping ban on anticompetitive practices is an unlawful power grab that challenges the agency’s constitutional and statutory authority and sets a dangerous precedent that the government knows better than the markets,” said Daryl Josepher, the group’s chief legal counsel. “The U.S. Chamber of Commerce will continue to hold the FTC accountable in court.”

In response to the order, FTC spokesman Douglas Farrar said: “The FTC stands by its clear authority, backed by statute and case law, to issue this rule. We will continue to fight to free hardworking Americans from illegal anticompetitive practices that stifle innovation, inhibit economic growth, lock in workers, and undermine Americans’ economic freedom.”

At the same time, the court order does not prevent the FTC from taking enforcement action against non-compete agreements on a case-by-case basis.

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This article has been updated with additional details and context.

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