Federal Appeals Court Halts FTC Noncompete Ban, Drawing Sharp Rebuke from Chair Lina Khan

Washington, D.C. – The Federal Trade Commission's (FTC) ambitious rule, designed to ban most noncompete clauses across the United States, has been effectively halted by a federal appeals court. This judicial intervention has drawn immediate and strong condemnation from FTC Chair Lina Khan, who described the outcome as a "massive betrayal" of American workers. The FTC had initially finalized the sweeping ban in April 2024, aiming to boost worker mobility and foster greater economic competition.

The proposed rule sought to prohibit new noncompete agreements and invalidate the majority of existing ones, a move projected to significantly increase worker incomes. However, the regulation faced swift legal opposition from various business organizations, prominently including the U.S. Chamber of Commerce. These entities contended that the FTC had exceeded its statutory authority and that noncompete clauses are crucial for safeguarding proprietary information and investments in employee training.

The legal challenges primarily unfolded within the Fifth Circuit Court of Appeals, where business groups successfully sought preliminary injunctions to prevent the rule's implementation. This legal victory for corporate interests effectively nullifies, at least temporarily, the FTC's efforts to dismantle these restrictive employment covenants. The court's decision underscores the ongoing legal battle over the FTC's regulatory scope and its ability to enforce broad economic policies.

Lina Khan, in a public statement on social media, expressed her profound disappointment and outrage at the court's ruling. > "A massive betrayal of the 25,000+ Americans who explained to @FTC how noncompetes keep people trapped and coerced, undermining basic freedoms," Khan stated. She further asserted, > "Another clear sign that, despite its rhetoric, this administration is deeply hostile to American workers." Her remarks highlight a deep division regarding the administration's commitment to labor protections.

Noncompete clauses have long been a subject of intense debate, with critics arguing they suppress wages, stifle innovation, and limit workers' ability to pursue better career opportunities. Advocates for the FTC's ban emphasized that such clauses disproportionately impact lower-wage workers and hinder entrepreneurship, potentially costing the U.S. economy billions annually in lost wages and innovation. The appeals court's decision represents a significant setback for those advocating for increased worker power and a more dynamic labor market.