The FTC’s ban against noncompete agreements is under threat

A federal judge has partially blocked the Federal Trade Commission’s impending ban on noncompete agreements from going into effect. The ban had been set to go into force on September 4th, but on Wednesday, Judge Ada Brown issued a preliminary injunction in a lawsuit brought against the FTC.

Tax firm Ryan LLC filed the lawsuit against the FTC the same day the ban was announced in April, arguing that the ban is “an unauthorized, unconstitutional attempt to eliminate a long-established private economic arrangement.” The US Chamber of Commerce and Business Roundtable are among those who have joined the suit since its filing.

The plaintiffs are “substantially likely to prevail on the merits of their challenge to the FTC’s Non-Compete Rule,” Brown writes in the preliminary injunction. Brown intends to rule “on the ultimate merits of this action on or before August 30, 2024,” according to the order.

“The FTC stands by our clear authority, supported by statute and precedent, to issue this rule,” FTC spokesperson Douglas Farrar said in a statement. “We will keep fighting to free hardworking Americans from unlawful noncompetes, which reduce innovation, inhibit economic growth, trap workers, and undermine Americans’ economic liberty.”

The FTC voted 3-2 in support of the ban. At the time, the FTC argued that the ban would allow for more than 8,500 new businesses to be made each year.

Update July 3rd: Added statement from the FTC.