US FTC's Non-Compete Agreement Ban Faces Legal Challenges and Different Opinions

TapTechNews July 4th news, in April this year, the US Federal Trade Commission (FTC) introduced a regulation that almost completely prohibits non-compete agreements, which was originally scheduled to take effect in September. Recently, this regulation has encountered legal challenges, and a federal judge has temporarily suspended the implementation of this ban.

 US FTCs Non-Compete Agreement Ban Faces Legal Challenges and Different Opinions_0

The US District Court Judge for the Northern District of Texas, Ada Brown, on Wednesday granted a request for a stay of execution filed by several plaintiffs, meaning the ban is temporarily ineffective against these plaintiffs. She said the Plaintiffs may succeed in the lawsuit, and that the FTC may have lacked the necessary power when formulating this ban. Judge Brown is expected to make a final ruling by the end of August.

The FTC spokesman, Douglas Farrar, said that the commission will continue to defend the legitimacy of this regulation and emphasize that this regulation will promote labor mobility and economic growth.

TapTechNews noted that one of the opponents of this ban is the accounting firm Ryan L.L.C., who believe that this ban will limit the ability of enterprises to protect trade secrets and sensitive information. Other organizations such as the US Chamber of Commerce have also joined the opposition, questioning whether the FTC has the right to formulate this ban and calling it arbitrary, capricious and illegal.

Those who support this ban believe that this ban can promote labor mobility and bring higher incomes to workers. The FTC estimates that this ban will increase the income of US workers by at least $400 billion in the next ten years. The commission believes that non-compete clauses will limit workers' freedom to change jobs and affect about one-fifth of US workers, that is, about 30 million people.

Currently, another lawsuit against this ban is being heard in the federal court in Pennsylvania. Last week, the US Supreme Court restricted the regulatory power of federal agencies, which may increase the difficulty for the FTC to win this lawsuit.

The labor and employment lawyer Mark Goldstein believes that although Judge Brown's current ruling only applies to some plaintiffs, it strongly suggests that she will eventually judge the FTC's regulation as invalid, so that it cannot take effect nationwide.

Due to the ongoing lawsuits against this ban, some lawyers have already advised employers to take other ways to protect trade secrets and interests, such as stricter non-disclosure agreements and clauses requiring departing employees to repay training fees, etc.

However, even these alternative plans are facing increasing scrutiny. The FTC's ban covers de facto non-compete agreements, that is, measures that will actually prevent workers from changing industry jobs even if they are not marked as non-compete agreement clauses.

It is worth noting that in addition to the FTC's ban, other federal agencies and state legislatures are also taking measures to limit the use of non-compete agreements.