A federal court in Texas temporarily blocks the US government's ban on noncompete agreements set to take effect on September 4, and plans to rule on August 30

A federal court in Texas has partially blocked the government's ban on noncompete agreements that was set to take effect September 4.

NPR 2024-07-04 Andrea Hsu

Context & Ripple Effects

The challenge followed the FTC’s economywide rule against noncompete clauses, a major attempt to reshape the rules governing worker mobility. The Texas litigation became the critical test of whether that change could proceed on the agency’s timetable.

The temporary order also foreshadowed the case’s later district-court ruling striking down the FTC rule, making this injunction an important turning point rather than a routine procedural delay.

First-order effects

The September 4 rollout is no longer uniform: the FTC’s noncompete ban is paused at least in part while the Texas court assesses its legality.
Employers and workers covered by the order face continued uncertainty over which noncompete terms can be enforced until the court’s August 30 decision.

Second-order effects

Companies that had been preparing to revise employment contracts can delay or segment those plans, while workers’ ability to rely on the new federal standard varies with the litigation’s scope.
The case shifts immediate attention from FTC implementation to court challenges, encouraging affected businesses to contest the rule rather than treat it as settled.

Third-order effects

If courts continue to invalidate broad agency employment rules, durable changes to noncompetes may depend more on legislation or state-level policy than on FTC rulemaking.
The dispute is part of a broader talent-to-IP litigation transition, in which worker mobility protections and employers’ claims over competitive knowledge are increasingly resolved through legal challenges.

The trend: Federal efforts to standardize worker-mobility rules are increasingly being tested in court before they can reshape employer practices.

Discussion

@chrisgeidner @chrisgeidner on x
Breaking: Judge Ada Brown, a Trump appointee in N.D. Texas, has blocked the FTC's noncompete rule, limited to the named plaintiffs, in an APA challenge as likely contrary to law and arbitrary and capricious. The rule is set to go into effect in September. https://storage.courtlis…
@metalawman @metalawman on x
It really is a pain to have to go through the process of passing bills & getting the president to sign them into law. Much easier to have 3 unelected bureaucrats at the FTC decide what's best for the country. But, alas, courts aren't playing along. That pesky old
@leehepner Lee Hepner on x
The Court further finds that the Rule is arbitrary and capricious, in contravention of the Admin Procedure Act. Says the FTC lacked “reasonable explanation” and relied on a “handful of studies.” (The FTC's Final Rule includes 560 pages of analysis and 1296 footnotes...) [image]
@mikesacksesq Mike Sacks on x
Aaaaaaand there it is: Trump judge “finds there is a substantial likelihood the [FTC's noncompete clause ban] is arbitrary and capricious because it is unreasonably overbroad without a reasonable explanation.” [image]
@econ_marshall Marshall Steinbaum on x
This ruling is an abomination because it completely ignores economic evidence in favor of the ideological priors of right-wing political pundits.
@sandeepvaheesan Sandeep Vaheesan on x
In pausing FTC non-compete ban, Judge Ada Brown says location of agency's rulemaking power in FTC Act is “suspect.” In other words, if Congress structured a statute differently than a judge would have, the plain text can be ignored. Just another example of judicial arrogance. [im…
@halsinger Hal Singer on x
Just revisited the section of the FTC's rule titled “Evidence of Suppressed Earning.” The number of unique studies cited in that section alone—I count ten—are vastly more than a “handful.” Yeesh. [image]
@leehepner Lee Hepner on x
“No state has ever enacted a non-compete rule as broad as the FTC's Non-Compete Rule.” Well that's just false. Just last year, California AB 1076 passed a categorical ban on all noncompete agreements, broader than the FTC's final rule. [image]
@khushitavasant @khushitavasant on x
BREAKING: Texas judge just granted a tax services firm motion for injunction and stay against @FTC's #noncompete rule. “the text, structure, and history of the FTC Act reveal that the FTC lacks substantive rulemaking authority with respect to unfair methods of competition under
@moreperfectus @moreperfectus on x
BREAKING: A Trump judge just halted the FTC ban on non-compete clauses. This temporary block could cost US workers $488 billion in earnings. Workers deserve the freedom to choose new jobs, and the conservative judiciary has no right to interfere in this process.
@matthewstoller Matt Stoller on x
Basically the FTC's noncompete ban survives a conservative Texas courtroom. How the f is Lina Khan the only person who keeps winning? https://faircompetitionlaw.com/ ...
@leehepner Lee Hepner on x
A federal court judge appointed by Trump in 2019 just blocked the FTC's immensely popular noncompetes ban. So much of Biden's sweeping pro-worker economic agenda has been torn down by an unaccountable activist judiciary. [image]
@rbreich Robert Reich on x
A Trump-appointed judge just halted the FTC's ban on noncompete clauses. One of the plaintiffs suing to reverse the ban is a Trump tax adviser. Of course Trump's fingerprints are all over a court ruling that will hurt working people. [video]
@josephpatrice Joe Patrice on x
SCOTUS Fans: “Lina Khan is just making up the law, see how much she gets struck down?” Also SCOTUS Fans: “It's imperative that we blow up decades of precedent so litigants can use the Fifth Circuit to strike down Lina Khan”
@douglaslfarrar Douglas Farrar on x
FTC Statement on Noncompete ruling in the Northern District of Texas. ["The FTC stands by our clear authority, supported by statute and precedent, to issue this rule. We will keep fighting to free hardworking Americans from unlawful noncompetes, which reduce innovation, inhibit…
@danielahanley Daniel Hanley on x
It's ironic how one day before Independence Day, a holiday about political freedom, a judge strikes down the FTC's rule granting millions economic freedom. It's indicative of the broader trend of the courts, especially SCOTUS, to transform the US into a judiciary-led oligarchy.
@revolvingdoordc @revolvingdoordc on x
NEW: Trump's former officials helped corporations overturn the FTC's noncompete ban: [image]
@brianros1 Brian Rosenwald on x
1. A really well fun campaign would be crusading on this — “I'm sticking up for the little guy and his judges are trying to stop me.” 2. Make no mistake, when this happens to Trump, he's just going to instruct his administration to ignore the court decision. Those are the stakes.
@josheidelson Josh Eidelson on x
“A federal judge delayed implementation of the US Federal Trade Commission's near-total ban on noncompete agreements, the first salvo in the high-stakes legal fight over how much freedom workers should have to switch jobs within an industry” https://www.bloomberg.com/... @madlinb…
@brian_callaci Brian Callaci on x
Big public fights between agencies using their authority to enact wildly popular rules and an out-of-control judiciary trying to stop them from doing so are good fights to have, IMO.
@josephvconiglio Joe Coniglio on x
The nice thing about a cult like ideology is that you never really lose even when you do. “However, the text, structure, and history of the FTC Act reveal that the FTC lacks substantive rulemaking authority with respect to unfair methods of competition under Section 6(g).”
@terrigerstein Terri Gerstein on x
The @FTC #NonCompete rule “is a watershed moment, whatever happens in court. It establishes a clear, incontrovertible record about why noncompetes are so harmful.” State legislatures should act now to curb #NonCompetes, as I wrote in April for @CNN. https://www.cnn.com/...
@thesbpc @thesbpc on x
The corrupt judiciary is again stripping protections from workers & legislating from the bench. The @FTC 's non-compete rule would have freed 1-in-5 workers from these coercive contracts, increased wages by $300 billion/year, & restored the core economic liberty to change jobs.
@m_ohlhausen Maureen Ohlhausen on x
The @ftc UMC non-compete rule is enjoined. The court held “the text, structure, and history of the FTC Act reveal that the FTC lacks substantive rulemaking authority with respect to unfair methods of competition under Section 6(g).”
@gushurwitz Gus Hurwitz on x
The nice thing about a PI telling you your going to lose when the decision comes down is that it gives you a few months to workshop how you'll spin that eventual loss. Because this needs some work.
@daveyseligman David Seligman on x
For this court, corporate interests' freedom to impose whatever they want through the fine print justifies the continued constraints non-competes place on workers' freedom everywhere. This from @TowardsJustice brief for @TexasAFLCIO in support of the rule: [image]
@chrisgeidner @chrisgeidner on x
Three things here: • The rule is not going into effect until September. • This ruling would block it from being enforced against the plaintiffs but is not a “nationwide injunction” blocking the rule as to everyone. • The final ruling, expected in Aug, could be more broad.
@ddayen David Dayen on x
Federal judge in Texas (can you believe it) places a preliminary injunction on the FTC's noncompete ban, and will rule on the merits (probably the same way) by the end of August https://storage.courtlistener.com/ ...
@mattschett Matt Schettenhelm on x
Last week, we reiterated that the FTC noncompete clause rule would be stayed by today. @BBGIntelligence It's about the worst possible time to be stretching rulemaking power in novel ways. [image]
@musharbash_b Basel Musharbash on x
In addition to not considering the harm that enjoining the FTC's Noncompete Rule will cause to workers, the judge also failed to establish that the Chamber of Commerce and other plaintiffs suing to stop the Rule would actually suffer “irreparable harm” if the Rule went into
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