Judge rules that FTC has legal authority to issue prohibition
A federal judge in the United States has shot down the challenge of a firm in Pennsylvania that wanted to block the Federal Trade Commission's (FTC) ban on non-compete contracts, according to reports.
US District Judge Kelley Brisbon Hodge from Philadelphia ruled that the FTC has clear legal authority to issue "procedural and substantive rules as is necessary to prevent unfair methods of competition," Bloomberg reported.
The challenge was raised by a tree-trimming company from Philadelphia that employs 12 people, with most of them under noncompete agreements.
According to Hodge's decision, the firm was unable to show that it would suffer irreparable harm if the ban took effect.
"On that finding alone, the court must deny plaintiff's motion," the judge said as quoted by Bloomberg.
A spokesperson from the FTC said Hodge's decision "fully vindicates that precedent and the plain text of FTC Act clearly provide us rulemaking authority to ban non-compete clauses."
Ban on non-compete clauses
The FTC announced in April that it will be banning non-compete contracts in the US to promote competition, protect the freedom of employees in changing jobs, increase innovation, and foster the creation of new businesses.
The ban is set to take effect in August, but it has been the subject of criticism and legal challenges from employers.
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Earlier this month, a federal judge in Texas blocked the FTC from enforcing the ban against a coalition of business groups that includes the US Chamber of Commerce, largest business lobby across the country.
Unlike, Hodge's decision, US District Judge Ada Brown in Dallas ruled that the FTC lacked the power to adopt broad rules that prohibit practices that it deems unfair methods of competition, Reuters reported.
The FTC was established to protect the public from "deceptive or unfair business practices and from unfair methods of competition through law enforcement, advocacy, research, and education."