Agency says it is considering appealing the decision
US judge overturns Biden administration's ban on non-compete clauses
A federal judge has struck down the FTC's rule banning noncompete agreements, a setback for the agency's efforts to free workers from restrictive employment terms. The commission said it is considering an appeal.
The FTC issued a rule in April banning non-compete agreements in U.S. employment contracts, and the action was immediately challenged in court. On Tuesday, U.S. District Court Judge Ada Brown in Dallas ruled that the FTC's rule was "unreasonably overbroad without a reasonable explanation." The new rule is set to go into effect Sept. 4.
"The Court concludes that the FTC lacks statutory authority to promulgate the Non-Compete Rule and that the Rule is arbitrary and capricious. The FTC's promulgation of the Rule thus constitutes unlawful agency action," Brown wrote in her decision. The judge said the commission had failed to provide evidence "as to why it chose to impose such a sweeping ban" rather than "target specific, harmful non-compete agreements," rendering the rule "arbitrary and capricious."
