A federal judge in Texas has blocked a brand new Federal Trade Commission rule that would have made it easier for workers to quit their jobs and work for a competitor.
In a ruling Tuesday, U.S. District Judge Ada Brown granted a motion for summary judgment by the U.S. Chamber of Commerce and other plaintiffs and denied the FTC’s motion for judgment of their favor.
In his decision, Brown concluded that the FTC had “overstepped” its statutory authority in establishing its rulemaking. The judge called the rule “arbitrary and capricious.” The judge also concluded that the rule would cause irreparable harm.
Because of the court’s decision, the FTC won’t find a way to implement its rule, which the judge ordered to take effect on September 4.
However, the choice doesn’t prevent the agency from enforcing non-compete agreements “on a case-by-case basis,” said Victoria Graham, a spokeswoman for the FTC.
The FTC can also be considering appealing the court’s decision, Graham said.
The The FTC voted in April to ban employers nationwide from concluding latest non-compete agreements or enforcing existing non-compete agreements on the grounds that the agreements restrict staff’ freedom and depress wages.
Opponents of the ban, nevertheless, argue that they need non-compete agreements to guard their business relationships, trade secrets and investments in training and hiring employees.
In addition to the Texas case, firms also sued the FTC in Florida and Pennsylvania to dam the rule.
In the Florida lawsuit brought by a senior living facility, the court issued a preliminary injunction prohibiting enforcement of the rule just for the plaintiff and never for other businesses.
In the Pennsylvania case, the court concluded that the plaintiff, a tree care company, failed to point out that the ban would cause it irreparable harm and that the corporate was unlikely to win the case.
Due to the differing rulings, the matter could ultimately find yourself before the US Supreme Court.
