A federal judge in Pennsylvania made a significant decision on Tuesday by declining to block the Federal Trade Commission’s ban on noncompete agreements. This ruling contrasts with another judge’s recent findings, indicating a divergence in legal opinions regarding the agency’s actions.
The ruling paves the way for the FTC’s implementation of a ban on virtually all noncompete agreements, affecting around one in five American workers. The ban is scheduled to come into effect on September 4.
Several business groups had initiated legal action to prevent the ban, arguing that it could limit their ability to safeguard trade secrets and confidential information. One such company, ATS Tree Services, filed a lawsuit in U.S. District Court for the Eastern District of Pennsylvania, emphasizing the importance of noncompetes in providing specialized training to employees while protecting confidential data.
However, Judge Kelley Brisbon Hodge found that ATS had not demonstrated irreparable harm from the ban. By denying the company’s motion for a preliminary injunction, she suggested that the lawsuit was unlikely to succeed in the long run.
In response to the decision, a spokesperson for the FTC, Douglas Farrar, stated that Judge Hodge’s ruling supported the agency’s authority to prohibit noncompete clauses, which are seen as detrimental to competition and economic growth.
ATS’s legal representative, Josh Robbins of the Pacific Legal Foundation, expressed disappointment with the court’s decision and indicated that the firm would continue to challenge the FTC’s authority. The possibility of an appeal was not specifically addressed.
