U.S. District Judge Sides with U.S. Chamber in Lawsuit Against Federal Trade Commission’s Ban on Noncompete Agreements

The U.S. District Court for the Northern District of Texas Judge Ada E. Brown blocked the Federal Trade Commission’s (FTC) ban on employment noncompete agreements Tuesday.

A noncompete agreement, where one party promises not to engage in conduct that would increase competition for the other party for a specific period, can be used to protect intellectual property, business investments, and trade secrets, among other areas of a business.

The FTC voted 3-2 in favor of banning noncompete agreements in April. The ban was set to take effect on September 4, 2024, requiring employers to not begin new noncompete agreements, ensure all current and past employees know the agreements will not be enforced, and end existing agreements with most employees.

The U.S. Chamber, alongside Business Roundtable, Texas Association of Business, and Longview Chamber of Commerce, filed a lawsuit on April 23, 2024, stating the ruling reaches beyond the scope of the FTC’s authority, and the agency cannot declare simple business practices to be “unfair methods of competition” and thus illegal.

Following the U.S. District Court decision, U.S. Chamber of Commerce President and CEO Suzanne P. Clark released a statement:

“This decision is a significant win in the Chamber’s fight against government micromanagement of business decisions. 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 holding the FTC — and all agencies — accountable to the rule of law, ensuring American workers and businesses can thrive.”

Kentucky Chamber President and CEO Ashli Watts released the following statement on the issue: 

“This ruling is a victory for businesses and workers in Kentucky and across the country. Noncompete agreements play a critical role in protecting intellectual property, business investments, and trade secrets — key drivers of innovation and economic growth. We applaud the U.S. Chamber of Commerce for defending the rule of law and the ability of companies to make prudent business decisions that support a thriving economy.”

To read the decision from the U.S. District Court for the Northern District of Texas, Dallas Division, click here.

To read the full ruling by the FTC, click here.

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