FTC Ban on Employee Non-Compete Clauses Halted by Trump Judge

A Trump-appointed federal judge on Wednesday partially blocked a Federal Trade Commission rule banning most noncompete clauses, or sweeping anti-employment agreements, that prevent workers from moving to or starting their own competing businesses.

Judge Ada Brown of the U.S. District Court for the Northern District of Texas issued a preliminary injunction blocking the ban from going into effect against a handful of plaintiffs who sued the FTC over the rule just hours after it was finalized in April. The plaintiffs are tax consulting firm Ryan LLC and the U.S. Chamber of Commerce, the nation’s largest lobbying organization.

Researchers with the Revolving Door Project noted Wednesday that Ryan LLC “was represented by (former President Donald) Trump’s Labor Secretary, Eugene Scalia, through the major law firm Gibson Dunn.”

Watchdog groups have accused the U.S. House of Representatives, which celebrated Wednesday’s decision, of “judge-shopping,” a tactic the group often uses to secure favorable legal outcomes. Texas’s district courts fall under the jurisdiction of the 5th U.S. Circuit Court of Appeals, which is dominated by right-wing extremists.

In her Wednesday decision, Brown did not immediately grant the plaintiffs’ request for a nationwide injunction against the noncompete order. But the judge signaled she would likely block the rule in its entirety with her final decision in the case on Aug. 30 — just days before the ban was scheduled to go into effect.

“The court finds that the commission exceeded its statutory authority in enacting the non-compete order and, therefore, plaintiffs are likely to succeed on the merits,” Brown wrote in her 33-page decision.

FTC spokesman he said in response to the ruling that the agency maintains its “clear authority, supported by statute and precedent, to issue this rule.”

“We will continue to fight to free hard-working Americans from unlawful noncompete laws that stifle innovation, stifle economic growth, lock out workers, and undermine Americans’ economic freedom,” the spokesman added.

The FTC, led by antitrust pioneer Lina Khan, estimates that about 30 million U.S. workers are bound by noncompete agreements that restrict their ability to change jobs for higher wages and better benefits. The commission believes its noncompete ban will increase U.S. workers’ wages by a total of $488 billion over the next decade.

Progressive advocacy groups are portraying Wednesday’s decision as another attack on workers — and a gift to corporations — by a Trump-appointed judge.

“By staying the noncompete order, this court is once again standing in the way of real benefits for workers,” said Emily Peterson-Cassin, director of corporate governance at Demand Progress. “With the decision to strike down Chevron earlier this week, a double blow to ordinary people.”

Tony Carrk, executive director of Accountable.US, said in a statement that “the industry-funded U.S. Chamber of Commerce continues to cost ordinary Americans a lot of money with its wave of lawsuits challenging the Biden administration’s crackdown on corporate greed, extortionate fees, and anti-worker barriers.”

“The U.S. Chamber of Commerce lawsuit halting the administration’s credit card late fee rule is already costing Americans $27 million a day — and now this latest lawsuit could close the door on millions of American workers to better opportunities,” Carrk said. “Non-compete clauses can force workers to endure low wages and poor working conditions as the rule is dragged through the courts. The CEOs of major banks and Wall Street on the U.S. Chamber of Commerce board have received a huge return on their investment, while American workers pay the price.”

“The need for congressional judicial reform has never been clearer as far-right judges in the 5th Circuit effectively erected a giant neon sign that read: ‘Corporations, Sue Here.’”