Biden-Harris admin's ban on non-competes found to violate federal law

On Tuesday, a federal judge tossed out the Federal Trade Commission’s ban on non-compete clauses, saying the agency "exceeded its statutory authority" in approving the rule in April. FTC Chair Lina Khan said, when the ban was enacted, "Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand." 

Judge Ada Brown of the US District Court for the Northern District of Texas wrote in her ruling, "The FTC lacks substantive rulemaking authority with respect to unfair methods of competition. The role of an administrative agency is to do as told by Congress, not to do what the agency think[s] it should do," NPR reported.

The FTC said it was "seriously considering a potential appeal," with FTC spokesperson Victoria Graham saying "today’s decision does not prevent the FTC from addressing noncompetes through case-by-case enforcement actions." Brown had temporarily blocked the rule from taking effect in July as she considered a case brought forth by the US Chamber of Commerce and tax service firm Ryan, Reuters reported. The rule was set to take effect on September 4.

"The Commission’s lack of evidence as to why they chose to impose such a sweeping prohibition ... instead of targeting specific, harmful non-competes, renders the Rule arbitrary and capricious," wrote Brown. The FTC claimed when its final rule passed in April that the removal of noncompetes would "generate over 8,500 new businesses each year, raise worker wages, lower health care costs, and boost innovation."

The removal of the noncompetes would "lead to new business formation growing by 2.7 percent per year, resulting in more than 8,500 additional new businesses created each year," and would bring the average worker an additional $524 per year. An estimated 18 percent of American workers, or 30 million people, are covered by noncompetes, the FTC stated.