Federal judge partially blocks U.S. ban on noncompetes
A federal judge in Texas partially blocks the U.S. government's ban on noncompete agreements, citing harm to businesses. The ruling delays the ban's enforcement for plaintiffs, questioning the FTC's authority. Noncompete debate continues between job flexibility advocates and confidentiality protection supporters.
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A federal judge in Texas has partially blocked the U.S. government's ban on noncompete agreements, which was set to take effect on September 4. The ruling came after Ryan LLC, a tax services firm in Dallas, sued to block the ban, arguing that it would cause serious harm to its business. The judge's decision postpones the ban's effective date for the plaintiffs, stating that they are likely to succeed in their case. The Federal Trade Commission (FTC) had voted to ban noncompetes for almost all U.S. workers back in April, but the court ruled that the FTC lacked the authority to make such a decision. The ban on noncompetes was intended to give workers more freedom to change jobs and potentially lead to wage increases and new business creation. However, opponents of the ban, including various business organizations, argue that noncompetes are necessary to protect confidential information and prevent talent poaching. The case highlights the ongoing debate over the impact of noncompete agreements on both businesses and workers across the country.
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15 commentsThat follows from three main statutory and historical clues:
1) Section 6(g) contains no penalty provision—which indicates a lack of substantive force. Other grants of substantive rulemaking specify what happens if regulated entities don't follow the rule.
2) The location of Section 6(g) is suspect. It's the seventh in a list of twelve almost entirely investigative powers, and starts with a grant of organizational power to "from time to time classify corporations". This is hardly where you would expect to find sweeping substantive rulemaking power if Congress had in fact chosen to grant it.
3) The FTC has not historically seen itself as possessing the power to issue substantive rules on unfair methods of competition. Courts are skeptical of agencies discovering latent powers decades later.
Overall, this is exactly what commentators expected to happen. Banning noncompetes may well be good policy, but it's up to the legislature (whether Congress or in individual states) to enact that policy. In addition, nothing in this decision prevents the FTC from using its adjudicatory powers to go after individual examples of noncompetes which it believes are unfair methods of competition.
[0] https://storage.courtlistener.com/recap/gov.uscourts.txnd.38...
> ....enabling its competitors to poach valuable employees, whose knowledge and training would go out the door.
Thats the funniest thing I read all week.
> In its complaint, Ryan LLC accused the FTC of overstepping its statutory authority in declaring all noncompetes unfair and anticompetitive.
> Judge Brown agreed, writing, "The FTC lacks substantive rulemaking authority with respect to unfair methods of competition."
> Through a statement Wednesday evening, the FTC said its authority is supported by both statute and precedent.
I’m not entirely against this outcome. Things that have big impact or are controversial or are visible enough to warrant public discussion should just be acted on by congressional legislation rather than assumed executive authority.
That said I think noncompetes and similar restrictions on employees are too broad and go too far in practice. They are essentially anti competitive. Still, the main problem for competition is the size and capital of incumbent mega corporations, and not JUST their noncompetes. The FTC needs to do something about that.
Congress can do their job and pass laws. I’m tired of law making delegated to faceless bureaucrats.
Almost every “crazy” decision you’ve heard about in recent years comes from this one district.
The shape of everything to come.
I wonder when those in the techworld will hear that little klaxon ringing in their head.
“She is the first African-American woman federal judge nominated by President Donald Trump”
In its complaint, Ryan LLC accused the FTC of overstepping its statutory authority in declaring all noncompetes unfair and anticompetitive.
Judge Brown agreed, writing, "The FTC lacks substantive rulemaking authority with respect to unfair methods of competition."
They're certainly not wasting any time; the bloody corpse of The Chevron Doctrine is still warm.
This is the new reality. Every single decision, rule, finding, regulation, fee / fine, and press release will now be litigated by the courts.
The Roberts Court's campaign for judicial primacy has usurped all the power of the (executive branch's) administrative state.
Because of course federal policy is best determined by life time appointees (beholden to their plantation class patrons) and not the anti-corporate democracy loving common citizenry.
Prove me wrong.
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