A second US judge blocks the FTC’s ban on worker “non-compete” agreements

A federal judge in Florida has temporarily blocked a U.S. Federal Trade Commission rule that would ban agreements typically signed by workers not to join their employers’ rivals or launch competing businesses, becoming the second judge to rule that the ban is probably invalid.

After a hearing Wednesday, U.S. District Judge Timothy Corrigan in Ocala, Fla., blocked the FTC from enforcing the rule on real estate developer Properties of the Villages pending the outcome of the company’s lawsuit, saying the commission lacked the power to enact the ban earlier. this year.

Corrigan did not issue a written opinion explaining his decision.

Properties of the Villages, which operates a residential community of more than 145,000 people, argues that only Congress, and not the FTC, has the authority to prohibit practices it deems anticompetitive.

About 30 million people, or 20 percent of American workers, have signed noncompetes, according to the FTC. The commission enforces federal antitrust laws.

FTC spokesman Douglas Farrar said in a statement that the limited nature of Corrigan’s ruling means the non-compete ban will go into effect for most Americans on Sept. 4.

“The FTC will continue its fight to free hard-working Americans from illegal non-competes that stifle innovation, inhibit economic growth, trap workers and undermine Americans’ economic freedom,” he said.

Attorneys for Village Properties did not immediately respond to requests for comment.

The Democratic-controlled commission and supporters of the rule, which takes effect in September, say the noncompete agreements suppress wages and worker mobility and violate U.S. antitrust law by limiting competition for labor.

California, Minnesota, Oklahoma and North Dakota have already banned non-compete agreements, and at least a dozen other states have passed laws limiting their use, but the FTC’s rule would be the first nationwide ban.

Business groups and many Republicans say noncompetes are a crucial tool for companies to protect trade secrets, confidential information and their investments in recruiting and training workers.

At least three lawsuits have been filed to challenge the ban. A federal judge in Texas last month blocked the FTC from enforcing the rule against a coalition of business groups, including the U.S. Chamber of Commerce, the nation’s largest business lobby, and tax services firm Ryan.

But later in July, a Philadelphia judge declined to block the rule in a lawsuit by a tree trimming service, finding it reasonable for the FTC to determine that the non-compete was “exploitative and coercive.”

(Reporting by Daniel Wiessner in Albany, New York; Editing by David Holmes)

TOPICS
US law