July 17, 2024

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Judge delays ban on employee non-compete agreements

Judge delays ban on employee non-compete agreements

New York

A federal judge on Wednesday delayed a ban on non-compete agreements for a small number of U.S. workers. On September 4th.

If the judge does not issue another ruling before that date, the ban will go into effect for most employers in the United States.

“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.

The Federal Trade Commission in April approved the ban, which 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.

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.

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The U.S. Chamber of Commerce called the 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.

This is a breaking news story and will be updated.