A federal judge in New York postponed the implementation of a ban on noncompete agreements for workers that was originally set to take effect on September 4. Judge Ada Brown from the U.S. District Court for the Northern District of Texas stated that while the order was preliminary, the court plans to make a final ruling on this matter by August 30, 2024.
The ban, which was approved by the Federal Trade Commission (FTC) in April, prohibits employers from enforcing noncompete clauses in existing employment agreements and bars companies from including them in future agreements. Following the FTC’s approval, lawsuits were filed by Ryan LLC, a tax services and software provider, as well as by the U.S. Chamber of Commerce and other business groups.
The FTC estimates that approximately 30 million workers, representing one in five U.S. employees, are currently subject to noncompete agreements. The agency argues that these clauses restrict job mobility, lower wages, hinder innovation, prevent entrepreneurs from starting businesses, and diminish fair competition.
Reacting to the court’s decision to delay the ban, the U.S. Chamber of Commerce hailed it as a victory, calling the FTC’s ban on noncompetes an overreach that violates the organization’s constitutional and statutory authority. The FTC, on the other hand, remains firm in its position that they have the legal mandate to issue this rule and will continue to advocate for removing noncompete agreements.
Although the court’s ruling delays the implementation of the ban, the FTC retains the ability to address noncompete agreements on a case-by-case basis through enforcement actions. This story is evolving and will be updated as new information becomes available.