Trump-Appointed Judge Strikes Down FTC Ban on Noncompete Agreements
"Thirty million workers who were trapped by these agreements will now stay trapped thanks to this ruling," an expert said.
A U.S. District Court judge in Texas on Tuesday struck down a Federal Trade Commission ban on noncompete agreements that was set to go into effect nationwide in September, drawing condemnation from workers' rights advocates who supported the ban.
Judge Ada Brown, who was appointed to the federal bench by then-President Donald Trump in 2019, ruled that the FTC didn't have the authority to issue substantive rules such as the noncompete ban, which was issued following a 3-2 vote of the agency's commissioners in April.
Noncompetes bar workers from getting jobs with competitors or leaving to start their own company. Commissioners in the majority, including FTC Chair Lina Khan, said the agreements suppress wages, stifle entrepreneurship, and distort labor markets. Advocates have long argued that the agreements are anti-worker.
The FTC has estimated that 30 million U.S. workers are subject to noncompete agreements. Had the rule gone into effect—voiding most existing agreements and prohibiting new ones—workers would have collectively increased their earnings by hundreds of billions of dollars over the next decade, the agency said.
"We are disappointed by Judge Brown's decision and will keep fighting to stop noncompetes that restrict the economic liberty of hardworking Americans, hamper economic growth, limit innovation, and depress wages," Victoria Graham, an FTC spokesperson, toldThe Washington Post.
Bharat Ramamurti, a former deputy director of the National Economic Council who's now a senior adviser at the American Economic Liberties Project (AELP), an anti-monopoly advocacy group, said on social media that "30 million workers who were trapped by these agreements will now stay trapped thanks to this ruling."
30 million workers who were trapped by these agreements will now stay trapped thanks to this ruling. The FTC estimated that banning noncompetes would empower workers and raise wages by nearly $200 billion over the next decade, which is why big business lobbyists fought it. https://t.co/G79l9l5UWs
— Bharat Ramamurti (@BharatRamamurti) August 20, 2024
Ryan LLC, a tax services firm based in Dallas, sued to block the FTC regulation as soon as it was issued in April. The U.S. Chamber of Commerce and the Business Roundtable later joined the case, which is in a jurisdiction friendly to their interests. If the case is appealed, which Graham said the FTC is "seriously considering," it would go to the U.S. Court of Appeals for the 5th Circuit—the most right-wing, pro-business appeals court in the country.
Tuesday's ruling, though momentous, didn't come as a surprise. Judge Brown signaled her intent to side with the plaintiffs last month when she partially blocked the FTC rule and placed a temporary injunction on it.
Similar cases involving the FTC noncompete ban have recently appeared in federal courts in Florida and Pennsylvania, with different and less consequential outcomes, raising the possibility that the matter will be taken up by the U.S. Supreme Court.
The Supreme Court's right-wing majority would make a ruling favorable to the FTC unlikely, so congressional action could be necessary to institute a ban on noncompete clauses, experts say.
Banning noncompetes is popular among the general public and has some bipartisan support, with a number of prominent Republicans having come out in favor of a ban or narrower reforms, such as prohibiting such agreements for low-wage workers.
Khan, an antitrust leader beloved of progressives, received 21 confirmation votes from Republicans in 2021, and parts of her agenda are supported by the GOP.
Khan is far from universally loved among Democrats. She's recently been the target of Democratic megadonors such as LinkedIn founder Reid Hoffman, who's pushed Vice President Kamala Harris, the Democratic presidential nominee, to sack Khan if elected. However, even Hoffman has indicated support for the noncompete ban.
HuffPost reporter Daniel Marans on Saturday wrote that the noncompete ban was "Khan's most ambitious initiative" and cited expert opinion that even if the rule didn't hold up, it was part of a broader push that could ultimately lead to reform.
"Even if the FTC rule is overturned, there are still many other efforts afoot to undermine the use of these agreements," Lee Hepner, senior legal counsel at AELP, told Marans. "It's a multi-pronged strategy."
