The attempt by the Federal Trade Commission (FTC) to ban non-compete agreements faces another legal battle after a federal judge has put a hold on the measure.
U.S. District Judge Ada E. Brown ruled Tuesday that the FTC does not have the authority to enact such a wide ban, stating the commission’s approach was “arbitrate and capricious” for its lack of evidence to justify the sweeping changes.
Brown had previously delayed the enaction of the ban before a U.S. District Judge in Pennsylvania in July said in a written decision that the FTC does indeed have the power to ban practices it deems “anti-competitive”, claiming that the use of non-compete agreements does indeed fall under that category.
According to the FTC, 30 million people, about 20% of the American workforce, have signed non-compete agreements.
“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” said FTC Chair Lina M. Khan in April when the ban was originally proposed. “The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”
Should the Federal Trade Commission seek to appeal Judge Brown’s ruling, it would be heard in the Fifth Circuit Court of Appeals, which could possibly lead to the case being ultimately heard by the Supreme Court.
