FTC’s ban on noncompete agreements halted as judge rules against

investmentnews.com:

A ban on noncompete agreements that would have widespread impact on employment across industries has been struck down in court.

The Federal Trade Commission wanted to bring in the rule next month that would have almost completely banned the use of the agreements except for senior executives, which the FTC said would protect “the fundamental freedom of workers to change jobs, increasing innovation, and fostering new business formation.”

Around 20% of American workers, or 30 million people are believed to be subject to noncompetes including many in the financial services industry. While businesses say they are necessary to protect a loss of their investment in people, others cite the benefits for individuals such as advisors who want to switch firms.

When the rule was announced in April it faced an immediate backlash from industry groups and lawsuits including one brought by the US Chamber of Commerce and tax firm Ryan LLC. A legal expert told InvestmentNews at the time that wealth firms should be prepared for the impact of the rule rather than assuming the legal challenges would stop it.

But, at least for now, the rule has been stopped, as US District Judge Ada Brown ruled in Dallas that the FTC did not have the power to implement its ban calling it “unreasonably overbroad without a reasonable explanation.” 

The Chamber of Commerce’s president and CEO Suzanne P. Clark was jubilant.

“This decision is a significant win in the Chamber’s fight against government micromanagement of business decisions,” she said. “A sweeping prohibition of noncompete agreements by the FTC was an unlawful extension of power that would have put American workers, businesses, and our economy at a competitive disadvantage. We remain committed to