DALLAS (CelebrityAccess) — A federal judge in Texas has blocked a new Federal Trade Commission (FTC) rule that would have banned the use of non-compete clauses in employment contracts.
These clauses, which typically prohibit former employees from joining or starting a rival company, are common in employment contracts in the live entertainment industry.
According to Reuters, U.S. District Judge Ada Brown in Dallas ruled that the FTC does not have the legal authority to adopt broad rules to prohibit business practices it deems unfair.
Additionally, Judge Brown’s ruling noted that while Congress expressly granted the FTC authority under the Magnuson-Moss Act of 1975 to make substantive rules prohibiting unfair practices, that authority does not apply to unfair competition. method.
Additionally, the court concluded that the FTC rule was “overbroad” and failed to address potential alternatives.
The FTC’s non-compete ban is scheduled to take effect on September 4.
Brown was nominated to the federal bench in 2019 by former President Donald Trump.
The decision was praised by the plaintiff in the case, Suzanne Clark, president and CEO of the U.S. Chamber of Commerce.
“This decision is a significant victory for the Chamber of Commerce in its fight against government micromanagement of business decisions,” said Suzanne P. Clark, president and CEO of the U.S. Chamber of Commerce. “Federal Trade Commission’s Comprehensive Ban on Non-Competes The Agreement is an unlawful expansion of power that will put American workers, businesses, and our economy at a competitive disadvantage. We remain committed to holding the FTC and all agencies accountable to the rule of law to ensure that American workers and businesses can thrive.
An FTC representative told Reuters it was considering appealing the decision.
