Second U.S. Judge Blocks FTC Ban on Worker Noncompete Agreements

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A federal judge in Florida has temporarily blocked a U.S. Federal Trade Commission rule that would ban agreements commonly signed by workers not to join their employers’ rivals or launch competing businesses, becoming the second judge to rule that the ban is likely invalid.

After a hearing on Wednesday, U.S. District Judge Timothy Corrigan in Ocala, Florida, blocked the FTC from applying the rule to real estate developer Properties of the Villages, pending the outcome of the company’s lawsuit claiming the commission lacked the power to adopt the ban earlier this year.

Corrigan did not issue a written opinion explaining his decision, and it was unclear whether the block on the rule applied more broadly.

Properties of the Villages, which operates a residential community of more than 145,000 people, claims that only Congress, and not the FTC, has the authority to ban practices that it deems anticompetitive.

About 30 million people, or 20% of U.S. workers, have signed noncompetes, according to the FTC. The commission enforces federal antitrust laws.

The FTC and lawyers for Properties of the Villages did not immediately respond to requests for comment.

The Democratic-controlled commission and supporters of the rule, which takes effect in September, say noncompete agreements suppress workers’ wages and mobility and violate U.S. antitrust law by limiting competition for labor.

California, Minnesota, Oklahoma and North Dakota have already banned noncompete agreements, and at least a dozen other states have passed laws limiting their use, but the FTC’s rule would be the first nationwide ban.

Business groups and many Republicans say that noncompetes are a crucial tool for businesses to protect trade secrets, confidential information, and their investments in recruiting and training workers.

At least three lawsuits have been filed challenging the ban. A federal judge in Texas last month blocked the FTC from enforcing the rule against a coalition of business groups, including the U.S. Chamber of Commerce, the country’s largest business lobby, and tax service firm Ryan.

But a judge in Philadelphia later in July refused to block the rule in a lawsuit by a tree-trimming service, finding that it was reasonable for the FTC to determine that noncompetes are “exploitative and coercive.”

(Reporting by Wiessner in Albany, New York; Editing by David Holmes)