Federal judge blocks FTC’s non-compete rule, calling it arbitrary

U.S. District Judge Ada Brown in Dallas said the FTC does not have the authority to stop competition by adopting such broad rules. She called the rule “capricious.”

“The Court concludes that the FTC lacks statutory authority to promulgate the Non-Competition Rule and that the Rule is arbitrary,” Brown wrote in the order.

The US Chamber of Commercewhich lobbies on behalf of businesses, slammed the new rule the same day the FTC announced its decision. She said she plans to sue the FTC for what she called an “illegal” and “flagrant usurpation” that amounts to “overreach” by the government.

Brown temporarily blocked the rule in July for a small number of employers while he considered a Chamber of Commerce bid to repeal it.

Brown wrote that even if the FTC had the authority to adopt the rule, it would not have argued for a ban on virtually all non-compete agreements.

In April, the FTC voted to approve a nationwide ban on non-compete agreements that apply to a wide range of roles, including white-collar jobs and hourly wage jobs such as retail sales staff and food preparation workers.

“Non-compete clauses keep wages down, stifle new ideas and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once non-competes were banned,” said FTC Chairwoman Lina Khan. in April.

Non-competes prohibit employees from working for competing companies even after they leave their jobs.

The FTC says these “exploitative” practices affect about 30 million workers, often forcing them to stay in jobs they hate, move when they don’t want to, move to lower-paying fields, leave the workforce altogether or face costly litigation. The move could help American workers earn an extra $300 billion a year, the FTC previously said.

The new rule would have eliminated those non-competes. The only exemption was for some senior executives, who make up just 0.75 percent of workers, the FTC said.