Note from the Editor: In an earlier issue of Tax Tidbits we had provided information regarding the FTC ruling on noncompete agreements. That decision has now been delayed pending subsequent legal challenge to that ruling.
A federal judge delayed implementation of the US Federal Trade Commission’s near-total ban on noncompete agreements, the first salvo in the high-stakes legal fight over how much freedom workers should have to switch jobs within an industry.
US District Judge Ada Brown in Dallas sided with the US Chamber of Commerce and a Texas-based tax firm that claimed in a lawsuit the agency lacks authority to craft rules defining unfair methods of competition. The groups warned the unprecedented rule would invalidate 30 million employment contracts in a move that “amounts to a vast overhaul of the national economy.”
The ban was set to take effect nationwide Sept. 4. It will now be on hold until August for the groups that seek to permanently strike the rule from the books, while the judge considers the merits of their suit.
Brown said in her ruling Wednesday that the challenge to the measure is “likely to succeed on the merits,” and that the public interest weighed in favor of temporarily blocking the rule.
The FTC approved the new rule in April, arguing that noncompete agreements unfairly block workers from switching jobs and undermine labor competition. The ban is backed by labor organizations AFL-CIO and the Service Employees International Union, Democratic senators and attorneys general from California, Illinois and 17 other states.
