She ruled that the agency’s prohibition was too broad.
Judge Ada Brown of the Northern Texas U.S. District Court invalidated a rule from the Federal Trade Commission (FTC) that sought to ban noncompete agreements. Judge Brown ruled that the agency exceeded its authority by imposing a broad prohibition on all noncompete agreements rather than focusing on specific, harmful cases. The rule, which was announced in April and set to take effect September 4, was intended to enhance competition and innovation by allowing workers to switch jobs or start their own businesses more freely.
When the rule was released, FTC Chair Lina Khan stated, “Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism.”
Judge Brown wrote in her decision, “The Commission’s lack of evidence as to why they chose to impose such a sweeping prohibition — that prohibits entering or enforcing virtually all non-competes — instead of targeting specific, harmful non-competes, renders the Rule arbitrary and capricious.”
The FTC is considering an appeal and emphasized the ruling does not prevent them from addressing noncompetes on a case-by-case basis.
As the Lord Leads, Pray with Us…
- For federal judges as they hear cases regarding business agreements and regulations.
- For Chair Khan and the members of the FTC as they seek to ensure a competitive U.S. market environment.
Sources: Daily Caller, Washington Post
