Ban on noncompetes halted by federal judge

A federal judge moved on Wednesday to temporarily halt a ban on noncompete agreements issued by the Federal Trade Commission this spring following a lawsuit against the agency by the U.S. Chamber of Commerce and a Dallas-based tax firm.

“This week, Americans celebrate our nation’s Declaration of Independence from an overreaching royal crown. Non-compete agreements predate the American Revolution, and our lawsuit seeks to preserve a robust freedom of contract for generations of enterprising Americans to come,” said John Smith, chief legal officer and general counsel for the Ryan tax firm.

The final FTC rule is set to ban nearly all new noncompete agreements and require companies to get rid of existing ones, except for a few executives.

Noncompete agreements aim to prevent employees from taking proprietary information and using it to form their own companies or benefit competitors for a period of time.

The narrow ruling only stayed the requirement "for the plaintiffs," so it didn't negate the rule for most companies.

Douglas Farrar, director of the FTC’s Office of Public Affairs, claimed that “the FTC stands by our clear authority, supported by statute and precedent, to issue this rule" when the judge who issued the injunction called that authority into question.