FTC told it exceeded its authority
A federal judge in Texas has barred the Federal Trade Commission from enforcing a ban on noncompete agreements. The rule was supposed to take effect September 4, but the judge ruled that the FTC didn’t have the authority to issue such a broad action, which would have covered all existing and new noncompete agreements for U.S. workers.
Big victory for DOJ
The decision represents a major victory for the Department of Justice, which accused Google of illegally preserving its monopoly among search engines, in part by paying companies such as Apple and Samsung billions of dollars to have Google as the default browsers on their products.
Commission says noncompete agreements stunt wages
Feds argued that such contracts limit the ability of workers to switch jobs and suppress earnings. Companies opposing the ban on noncompete agreements insist they need them to protect trade secrets, business relationships, intellectual property and the investment they make to train employees.
Not dead yet
The FTC says it may appeal the ruling. In addition to the Texas case, companies sued the FTC in Florida and Pennsylvania to block the ban. In Florida, the court granted a preliminary injunction prohibiting enforcement – just for the plaintiff. And the judge in Pennsylvania concluded the plaintiff couldn’t show it was irreparably harmed by the ban and probably wouldn’t win the case. Two such disparate rulings could mean the issue ends up before the Supreme Court.
What’s next?
Even with the federal ban on hold, employers and employees are subject to the laws and regulations in their jurisdiction. Many states and cities have laws limiting non-competition agreements. California and Oklahoma, for example, ban them completely and have for years. Lots of other states restrict them to only certain employees. Please contact us if you want to discuss your workforce strategies related to noncompetition agreements and other restrictive covenants.
