Judge Blocks F.T.C.’s Noncompete Rule

A federal judge on Tuesday upheld a challenge to the Federal Trade Commission’s ban on noncompete agreements, blocking it from taking effect in September as scheduled.

Judge Ada Brown of U.S. District Court for the Northern District of Texas ruled that the antitrust agency lacked authority to issue substantive rules related to unfair methods of competition, including the noncompete rule, which would have prohibited companies from restricting their employees’ ability to work for rivals.

The push to adopt the rule is part of the Biden administration’s effort to crack down on practices that regulators argue are anticompetitive, unfairly constraining workers.

Judge Brown had temporarily blocked the ban in July. Her decision on Tuesday renders that injunction permanent, and nationwide in scope.

Banning noncompete agreements would increase workers’ earnings by at least $400 billion over the next decade, the F.T.C. has estimated. The agreements affect roughly one in five American workers, or around 30 million people, according to the agency, whose purview includes antitrust and consumer protection issues.

Victoria Graham, an F.T.C. spokeswoman, said the agency was disappointed by Judge Brown’s decision and would “keep fighting to stop noncompetes that restrict the economic liberty of hardworking Americans, hamper economic growth, limit innovation and depress wages.”

“We are seriously considering a potential appeal, and today’s decision does not prevent the F.T.C. from addressing noncompetes through case-by-base enforcement actions,” Ms. Graham added.

A tax firm, Ryan, sued to block the rule just hours after the F.T.C. voted 3 to 2 in April to adopt it. The U.S. Chamber of Commerce later joined the case as a plaintiff, as did the