Texas federal judge blocks FTC's non-compete clause ban

Aug. 21 (UPI) -- A federal judge in Texas blocked the Federal Trade Commission 's ban on non-compete clauses and other rules related to unfair methods of competition.

U.S. District Judge Ada Brown on Tuesday sided with opponents of the Biden administration's effort to eliminate such contract language, ruling the FTC lacked the authority to issue the ban.

Brown, who issued a temporary injunction on the FTC rule last month, made it permanent and nationwide with Tuesday's decision.

The injunction was a victory for the tax firm Ryan, which sued the block the FTC rule, and the U.S. Chamber of Commerce. The chamber and other business groups said the rule limited their ability to protect trade secrets and confidential business information.

The FTC voted 3-2 in April on the new rule to ban non-compete clauses, charging it helped keep wages low, suppressed new ideas and prevented workers from striking out on their own by creating their own businesses.

Boston University law professor Russell Beck, who is an expert on trade secrets, said in an opinion piece in The Hill that non-compete clauses are necessary in some industries and a one-size-fits-all blanket ban on all would not likely pass legal muster in an appeals court.

FTC spokeswoman Victoria Graham said the agency was weighing a potential appeal .

"We are disappointed by Judge Brown's decision and will keep fighting to stop non-competes that restrict the economic liberty of hardworking Americans, hamper economic growth, limit innovation and depress wages," Graham said. "We are seriously considering a potential appeal and today's decision does not prevent the FTC from addressing non-competes through case-by-case enforcement actions."