COMP NEWS – A federal judge has rejected a company’s attempt to challenge the Federal Trade Commission’s (FTC) ban on noncompete agreements that was issued in April. This means that noncompetes will be effectively outlawed come this September.

A federal judge has rejected a tree-trimming company’s bid to block the Federal Trade Commission’s (FTC) ban on noncompete agreements from taking effect.

 

The FTC issued a rule in April that would ban all new noncompete agreements and require companies to let current and past employees know they won’t enforce existing agreements, carving out an exception for senior executives covered by existing noncompetes.

 

Around 18 percent of the U.S. workforce, or 30 million people, are covered by noncompete agreements, according to FTC estimates. The agreements span experience and industries, from fast food workers to physical therapists to CEOs.

 

ATS Tree Services had asked the court to stay the rule’s Sept. 4 effective date and for a preliminary injunction back in mid-May, and the court held oral arguments on the case earlier this month.

 

U.S. District Judge Kelley Hodge in Philadelphia said Tuesday that the FTC has the power to “to prevent unfair methods of competition in commerce” under the 1914 Federal Trade Commission Act, including agreements that prevent tens of millions of employees from leaving to work for a competitor or start a competing business.

 

“The Court finds Plaintiff has failed to establish a reasonable likelihood that it will succeed on the merits of its claims that the FTC lacks substantive rulemaking authority under its enabling statute, that the FTC exceeded its authority, and that Congress unconstitutionally delegated legislative power to the FTC,” Hodge wrote in her opinion.

To read more about noncompete clauses, click here.

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