A federal judge has ruled the Federal Trade Commission (FTC) can’t enforce its ban on noncompete agreements because the agency lacked the authority to enact the rule.

Dallas’ U.S. District Judge Ada Brown of the Northern District of Texas sided with the U.S. Chamber of Commerce and a Texas-based tax firm that sued to block the rule, writing in her decision yesterday that the FTC’s rule is “unreasonably overbroad without a reasonable explanation,” reported Bloomberg.

Bloomberg wrote, “Brown had previously delayed implementation of the ban, which was scheduled to take effect on September 4. The ruling is the judge’s final word on the case. The FTC could appeal the decision to the 5th US Circuit Court of Appeals in New Orleans.”

According to AP News, two other companies in addition to the Texas firm have sued the FTC over the noncompete rule, and those cases are pending in Florida and Pennsylvania. The companies argue that the noncompete ban would “make it hard to protect trade secrets and investments they make in their employees.”

In April, the FTC voted 3-2 to ban noncompete agreements, which can bar workers from taking positions with competitors for a period of time after they leave a job.

The FTC first proposed the rule in January 2023, and NACS; NATSO, Representing America’s Travel Plazas and Truckstops; and SIGMA: America’s Leading Fuel Marketers, sent a letter to the FTC opposing the FTC’s proposed rule banning non-compete agreements. The associations did not oppose banning noncompete agreements for many categories of lower level employees but took the position that employers should have the ability to enter into noncompete agreements with senior executives and those with specialized knowledge of trade secrets and key strategies.

The letter stated that the groups were concerned that the proposed rule is too broad, and that it should either be withdrawn or substantially revised.