AUSTIN, Texas — A new rule that would have made it easier for employees to quit their jobs and work for a competitor has been blocked.
U.S. District Judge Ada Brown concluded Tuesday the Federal Trade Commission (FTC) "exceeded its statutory authority" in making the rule, which Brown called "arbitrary and capricious."
According to the Associated Press, Brown also said the rule would cause irreparable harm. The FTC said it's considering an appeal.
Because of the court's decision, the FTC won't be able to enforce the rule, which would have gone into effect on Sept. 4. However, an FTC spokesperson said the decision won't prevent the agency from addressing noncompete agreements through "case-by-case" enforcement actions.
In April, the FTC voted to ban employers nationwide from entering into new noncompete agreements or enforcing existing noncompete agreements, saying they restrict workers' freedom and suppress wages.
Companies opposed to the ban argued that they need noncompete agreements to protect business relationships, trade secrets and investments they make to train or recruit employees.
Apart from Texas, companies sued the FTC in Florida and Pennsylvania to block the rule.
In Florida, the court granted a preliminary injunction, prohibiting enforcement of the rule for the plaintiff, which was a retirement community. In Pennsylvania, the court ruled the plaintiff failed to show it would be irreparably harmed by the ban.
The differing rulings could eventually push the issue to the U.S. Supreme Court.