When the Federal Trade Commission voted to nullify non-compete agreements for nearly all American workers back in April, tax services firm Ryan LLC of Dallas, filed suit almost immediately. And they were not alone: the US Chamber of Commerce, the Business Roundtable, and other groups joined the suit.
"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,” Suzanne Clark of the Chamber of Commerce said, reports The Hill.
Now, Federal Judge Ada Brown of the U.S. District Court for the Northern District of Texas seems to agree, ruling that the FTC overstepped its authority. "The FTC lacks substantive rulemaking authority with respect to unfair methods of competition," Judge Brown wrote. "The role of an administrative agency is to do as told by Congress, not to do what the agency think[s] it should do.”
It's a sweeping blow to the FTC, but one that the agency will surely appeal.
"Today’s decision does not prevent the FTC from addressing noncompetes through case-by-case enforcement actions," an agency spokesperson said, according to NPR.
Kevin Goldstein, an antitrust partner at Winston & Strawn, added that Judge Brown's ruling might be welcomed by businesses, but "the uncertainty continues as the fight now moves to the appellate courts.”
The Pennsylvania Ruling
Judge Ada Brown's ruling is not the only ruling on the non-compete ban. In July, Federal Judge Kelley Brisbon Hodge, of the U.S. District Court for the Eastern District of Pennsylvania, denied a motion for an injunction on the ban, saying that the case against the FTC lacked merit.
An agency spokesperson said of Judge Hodge's ruling that it "fully vindicated" the FTC's authority, and shows that non-competes "harm competition by inhibiting workers’ freedom and mobility while stunting economic growth,” reports the New York Times,
These opposing rulings make it increasingly likely that higher courts will hear a case on the ban to decide its fate.
Verdict
As the election draws nearer and the make-up of the Supreme Court grows uncertain, pro-business organizations which see the high court's current bench favorable to them, might try to push to accelerate their appeals' climb up the judiciary system. Meanwhile, for business stuck in limbo, it may be wise to carry on assuming the ban is in place until a final ruling is made.