FTC’s noncompete order partially blocked by Texas judge

This sound is generated automatically. Let us know if you have feedback.

Brief description of the dive:

  • On July 3, a federal judge in Texas granted a tax services firm’s request for a temporary injunction prohibiting the Federal Trade Commission from including non-compete agreements in employment contracts and stayed the effect of the injunction against the plaintiffs.
  • Judge Ada E. Brown of the United States District Court for the Northern District of Texas ruled that the FTC violated the Administrative Procedure Act and exceeded its statutory authority by issuing the ban, which she said had a “substantial likelihood” of being found to be arbitrary and capricious.
  • Brown said the order is limited in scope to the plaintiffs and plaintiff-intervenors named in the lawsuit; it is not a nationwide order. She added that the court will rule on the agency’s merits by Aug. 30, 2024.

Diving Insight:

The FTC voted along party lines to approve the ban in April, and several lawsuits have since been filed against the agency. In addition to Ryan, the U.S. Chamber of Commerce sued the FTC shortly after the ban was announced, but a judge put that lawsuit on hold last month because Ryan filed first.

This is an evolving story.