Federal Judge Strikes Down Anti-Employer Non-Compete Rule

Source: PA Chamber of Business and Industry

Last week, a federal judge in Texas barred a U.S. Federal Trade Commission rule from taking effect that would have banned more forms of noncompete agreements from employment contracts nationwide with retroactive effect.

In her decision, U.S. District Judge Ada Brown in Dallas said the FTC does not have the authority to ban practices it deems unfair methods of competition by adopting broad rules. She had temporarily blocked the rule in July while she considered a petition by the U.S. Chamber and a tax entity to strike the ruling down for the major negative implications the ruling would have had on the nation’s business community. Notably, the FTC’s proposed rule came under fire for the challenges it would present for businesses’ ability to safeguard trade secrets and other confidential information. The rule was set to take effect Sept. 4.

When the FTC initially voted on the ruling in April, it became the subject of a PA Chamber member-sponsored webinar in May. During the event, attorneys from Buchanan Ingersoll & Rooney laid out the implications for businesses and explained what they could do to protect themselves. The PA Chamber also signed on to a national coalition letter in May requesting a stay and delay of implementation of the rule, which made the case that the lack of guidance on the rule created a lack of certainty for employers.

Following Judge Brown’s decision, U.S. Chamber President and CEO Suzanne Clark called the ruling a “significant win in the Chamber’s fight against government micromanagement of business decisions.” Read the U.S. Chamber’s press release praising the decision here.

The Columbia Montour Chamber joined with over 260 business groups including the PA Chamber of Business and Industry in sending a letter to Congress opposing the FTC's proposal.

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Founded in 1916, the Pennsylvania Chamber of Business and Industry is the state's largest broad-based business association, with its membership comprising businesses of all sizes and across all industry sectors. The PA Chamber is The Statewide Voice of BusinessTM.