US judge throws out FTC's ban on non-compete agreements
A US District Judge overturned the FTC's ban on non-compete agreements, citing lack of authority, affecting 30 million workers. The Biden administration supports the FTC's efforts to limit such agreements.
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A US District Judge has overturned the Federal Trade Commission's (FTC) ban on non-compete agreements, stating that the agency lacked the authority to impose such a rule. Judge Ada Brown criticized the ban as "arbitrary and capricious," arguing it was overly broad and not adequately justified. The FTC had aimed to invalidate non-compete clauses that restrict employees from joining rival firms or starting competing businesses, affecting approximately 30 million workers. The rule was intended to enhance competition and wage growth, but faced opposition from business groups who claimed it would hinder their ability to protect trade secrets. Following the ruling, FTC spokesperson Victoria Graham expressed disappointment but indicated the agency would consider an appeal and continue to address non-compete agreements through enforcement actions. The decision reflects a broader legal debate over the FTC's regulatory powers, with mixed court outcomes on similar challenges. The Biden administration has pledged to support the FTC's efforts to empower workers and limit non-compete agreements.
- A US judge has blocked the FTC's ban on non-compete agreements, citing lack of authority.
- The ruling affects around 30 million workers bound by such clauses.
- The FTC aimed to increase competition and wages through the ban.
- Business groups argued the ban would undermine their ability to protect trade secrets.
- The Biden administration continues to support the FTC's efforts against non-compete agreements.
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- Many commenters express disappointment with the judge's decision, viewing it as a setback for employee rights and mobility.
- Some argue that non-compete agreements are detrimental to competition and entrepreneurship, emphasizing the need for legislative action rather than administrative rulings.
- Critics of the ruling highlight the perceived overreach of the FTC and the need for clearer authority in regulating non-compete clauses.
- Several comments mention the historical context of non-compete agreements, with references to California's long-standing ban as a counterpoint to the ruling.
- There is a call for more permanent solutions to protect workers from restrictive agreements, rather than temporary administrative measures.
43 comments>"A sweeping prohibition of noncompete agreements by the FTC was an unlawful extension of power that would have put American workers, businesses, and our economy at a competitive disadvantage," U.S. Chamber of Commerce President and CEO Suzanne Clark said in a statement.
If you ever wondered what kind of moron would get this completely backwards and think that non-compete agreements give Americans a competitive advantage, now you know.
The proposed noncompete had a 10-year lockup for a freelance contract…obviously nonsense. But it was so helpful to say “these aren’t sticking around so let’s just cut it out.”
These changes make a big difference in encouraging entrepreneurs and helping our economy, as well as just reducing stress for a lot of people.
Making rules like this is Congress's job not just because some judge says so—it's Congress's job because only Congress can make laws that aren't perpetually at risk of being stripped out when a new party takes power.
I want non-competes to be banned permanently, not just banned until the political winds shift by 5%.
Edit: In 1941, so it's been a while
https://www.uschamber.com/lawsuits/u-s-chamber-wins-lawsuit-...
I hope she leaves them nothing.
The idea has been pushed that the courts are apolitical, that judges (particularly Supreme Court judges) sit atop an Ivory Tower and come down every now and again to be consulted like the Oracle of Delphi. The truth is that the courts are, and always have been political. People are becoming increasingly aware of this.
Put another way: take any Supreme Court decision on a controversial issue and you'll probably find a reasoned dissent in addition to the majority decision. More often than not it's the politics of the justices voting that determine which of those became the majority opinion, not some objective argument of law. After all, on constitutional matters, the court is interpreting very few words that are rather vague. All sorts of tests and doctrines have been summoned out of thin air on top of this.
Courts, particularly in Texas, have become increasingly activist and have made sweeping nationwide rulings, giving little to no deference to Congress or the Executive. This is a power grab by the judiciary over the other two branches and a pretty serious one.
It's hard not to look at the court system we have and see it as nothing more than a tool to block any legislative action but only in one direction.
Who said that employers had the authority to tell ex employees what to do to begin with ?
I think legally, such bans can easily be justified by the fact that a corporation is not actually a person. Corporations do not have the constitutional right to free speech as people do.
Personally, I tend to lean much further on this issue as I believe that corporate personhood and limited liability are unethical, socially harmful and economically inefficient (in the long run).
Shocker.
I wonder how the FTC would do that? "Targetting specific..." sounds to me like addressing people's contracts individually. That is a job for a lawyer not a commission (I am not a lawyer - I know little...).
>"The Commission’s lack of evidence as to why they chose to impose such a sweeping prohibition ... instead of targeting specific, harmful non-competes, renders the Rule arbitrary and capricious," wrote Brown, [U.S. District Judge]
https://www.reuters.com/legal/us-judge-strikes-down-biden-ad...
There's seems to be a conservative judge in Texas for just about any regressive thing you need.
Right. Like you actually have a fucking choice when every employer does it and you've come out of college with some $300k in student debt. This judge needs to step down on Earth. Or is he on a Boeing spacecraft?
Imagine you are cofounder of a startup that raised significant VC capital. But your base salary is less than 151k. Can you leave and start a competing firm?
It's a summary judgement essentially saying that even though the FTC has a long-established history in both the law itself and legal precedent for making rules to protect people from "unfair methods of competition" apparently that was all an illusion and the FTC has no power to do that at all. This was based on (IMO) flimsy reasoning that a 1975 law[1] that granted the FTC some new, explicit rulemaking powers over warranties (including a provision that says something like "nothing in this law is meant to restrict powers already granted by the FTC Act") actually caused the FTC to lose all other implicit rule-making power, even though obviously that wasn't Congress's intention and isn't supported by the text.
The judge went further to claim the rule was "arbitrary and capricious", even though the rule was published alongside 570 pages of analysis[2] (that I also read), and the relevant Supreme Court decision[3] explicitly requires judges to defer to the expertise of federal agencies in these matters.
Once again, we can't have nice things, even if the law literally says we can.
[1]: https://en.wikipedia.org/wiki/Magnuson%E2%80%93Moss_Warranty...
[2]: https://www.federalregister.gov/documents/2024/05/07/2024-09...
[3]: https://en.wikipedia.org/wiki/FCC_v._Prometheus_Radio_Projec...
Since this was a separate agreement with me personally about me selling my option to do or not do something in the future, the board of the startup wasn't a party to the negotiation (although they were aware the acquirer had requested this and I'd agreed to negotiate). I did decide to sell my future personal rights for a limited number of years and I kept all the proceeds from that separate agreement. This turned out to be quite lucrative for me. Frankly, I really didn't want to compete with the acquirer anyway so it was literally a 'no-cost' thing for me to agree to. The acquirer, the startup and I all ended up being happy.
To the extent banning all non-competes would have prevented me from making that personal agreement, I think it's a bad idea. I own the rights to my own future behavior and I should be able to keep, sell or give away those rights as I wish.
At the same time, I also think non-compete agreements should not be allowed to just be automatically bundled into the terms of an employment agreement. Non-competes should be optional for all parties and negotiated separately from employment agreements. I'd also be fine with a limit on the percentage of employees a company can have non-competes with and requiring that any non-compete cost the company a significant amount of additional money compared to that employees base compensation.
Related
Judge delays ban on noncompete agreements for employees
A federal judge delays noncompete ban for select employers, questioning FTC's authority. The ban aims to prevent job restrictions, but faces opposition from US Chamber of Commerce. Efforts ongoing to block ban nationwide.
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.
Federal judge partially blocks U.S. ban on noncompetes
A federal judge in Texas partially blocked the U.S. government's ban on noncompete agreements, citing plaintiffs' likelihood of success and public interest. The FTC's ban aimed to enhance job mobility and competition.
Judge says FTC lacks authority to issue rule banning noncompete agreements
A Texas judge ruled FTC lacks authority to ban noncompete agreements, casting doubt on enforcement. Lawsuit questions FTC's rulemaking power. Final ruling expected by August 30, impacting enforcement on September 4.
FTC Wins Round Two in Its Non-Compete Ban Defense
The FTC aims to ban non-compete agreements, facing legal challenges. A Texas court questioned its authority, while a Pennsylvania court affirmed it. Further rulings are anticipated as the effective date approaches.