A Trump-appointed judge in Texas blocked a Biden administration rule that bans noncompete agreements, teeing up a possible appeal that’s unlikely to save the ban.
On Tuesday, U.S. District Judge Ada Brown set aside the rule nationwide, which had been scheduled to take effect Sept. 4, siding with business interests including the Chamber of Commerce. Brown concluded that the Federal Trade Commission lacked authority to issue the rule and deemed it “arbitrary and capricious because it is unreasonably overbroad without a reasonable explanation.”
Announcing the rule in April, FTC Chair Lina Khan said that noncompete clauses “keep wages low, suppress new ideas, and rob the American economy of dynamism” and that the rule “will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.” An FTC spokesperson said after the ruling that the agency was seriously considering appealing and noted that the judge’s decision doesn’t prevent the agency “from addressing noncompetes through case-by-case enforcement actions.”
The government’s prospects on appeal aren’t great, however, given this Supreme Court has been broadly skeptical of agency authority and has struck down Biden administration initiatives. The intermediate federal appeals court covering Texas is the 5th U.S. Circuit Court of Appeals, whose rulings have sometimes gone too far right even for the Supreme Court.
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