A federal judge could block the Federal Trade Commission’s pending ban on non-compete agreements from taking effect. Non-compete agreements, which are designed to make it difficult for employees to move to similar positions at other companies or start their own businesses, are a contentious issue within tech companies in particular.
The ban was originally scheduled to take effect on September 4, but on Wednesday, Judge Ada Brown issued a preliminary injunction in a lawsuit against the Federal Trade Commission (FTC). For these plaintiffs, the FTC’s injunction will no longer be in effect on September 4. Brown said she plans to rule on their entire challenge to the FCC “on or before August 30, 2024,” which could prevent the FTC from blocking non-competes nationwide.
Tax firm Ryan LLC filed a lawsuit against the FTC on the same day the April ban was announced, calling the ban an “unauthorized and unconstitutional attempt to eliminate long-standing private economic arrangements.” The U.S. Chamber of Commerce and the Business Roundtable are among the organizations that have joined the lawsuit since it was filed.
Brown wrote that she granted the preliminary injunction because the plaintiffs “are likely to prevail on their challenge to the FTC’s noncompete rules.”
“The FTC upholds our clear authority, supported by statute and precedent, to issue this rule,” FTC spokesman Douglas Farrar wrote in a statement. “We will continue to “
The FTC voted 3-2 in favor of the ban. At the time, the FTC believed the ban would allow more than 8,500 new businesses to be created each year.
Updated July 3: Added a new statement from the FTC and clarified when an FTC ban may or may not take effect.
