Noncompetes are here to stay
As expected, a federal judge blocked the Federal Trade Commission's ban on non-compete agreements weeks before it was set to go into effect.
In an opinion filed late Tuesday, a Trump-appointed Texas Judge struck down the FTC’s rule, which was adopted in April. The judge ruled that the agency didn't have the authority to issue such a sweeping ban, and even if it did, it did not justify why those agreements needed to be banned.
The suit was filed by Ryan LLC, a Dallas tax services firm, with the backing of business lobbying groups. They are represented by a team of attorneys including Eugene Scalia, the former Secretary of Labor.
This ruling was not a surprise. When the FTC adopted the rule, even those who celebrated did so with caution. The rule imposes a significant break from the status quo, and recently its been easy for business groups to get an injunction against a unfavorable rule if they present a case before the right judge.
The US Chamber of Commerce called it “a major legal victory for American businesses, workers, and the economy.” Businesses tend to argue that banning noncompetes discourages investing in employees.
Those in favor of banning them argue they can trap a worker in an unpleasant work environment, potentially stunting their career development or pushing them out of an industry altogether. Some also say they suppress wages, considering that switching jobs is a key way people increase their earnings.
Noncompetes are particularly prevalent on Wall Street and in the medical industry. Many tech workers are also bound by noncompetes, but notably California, the home of Silicon Valley, has banned such agreements for decades. Some have argued that rule has contributed to the success and innovation of Silicon Valley.
The suit was filed by Ryan LLC, a Dallas tax services firm, with the backing of business lobbying groups. They are represented by a team of attorneys including Eugene Scalia, the former Secretary of Labor.
This ruling was not a surprise. When the FTC adopted the rule, even those who celebrated did so with caution. The rule imposes a significant break from the status quo, and recently its been easy for business groups to get an injunction against a unfavorable rule if they present a case before the right judge.
The US Chamber of Commerce called it “a major legal victory for American businesses, workers, and the economy.” Businesses tend to argue that banning noncompetes discourages investing in employees.
Those in favor of banning them argue they can trap a worker in an unpleasant work environment, potentially stunting their career development or pushing them out of an industry altogether. Some also say they suppress wages, considering that switching jobs is a key way people increase their earnings.
Noncompetes are particularly prevalent on Wall Street and in the medical industry. Many tech workers are also bound by noncompetes, but notably California, the home of Silicon Valley, has banned such agreements for decades. Some have argued that rule has contributed to the success and innovation of Silicon Valley.
