Federal court throws out government ban on noncompete agreements

A federal judge in Texas has barred a new Federal Trade Commission rule from taking effect that would have banned non-compete agreements.

Judge Ada Brown temporarily blocked the rule in July following a challenge from the Chamber of Commerce.

She ruled on Tuesday that the FTC overstepped its authority by implementing such a broad rule, saying:

The Commission’s lack of evidence as to why they chose to impose such a sweeping prohibition … instead of targeting specific, harmful non-competes, renders the Rule arbitrary and capricious.

An FTC spokesperson said the agency was disappointed with the ruling and is “seriously considering a potential appeal.”