On Tuesday, Judge Ada Brown of the U.S. District Court for the Northern District of Texas ruled that the Federal Trade Commission (FTC) cannot enforce its ban on noncompete agreements.

The rule was scheduled to take effect on Sept. 4 and targeted employment agreements that prohibit, penalize or effectively prevent a worker from seeking or accepting work elsewhere or operating a business after leaving a particular job. Last month, the judge had partially blocked the rule by granting a preliminary injunction while considering whether to strike it down entirely.

In the ruling this week, Judge Brown wrote that the FTC had overstepped its authority when it approved the “Non-Compete Clause Rule" by a vote of 3-2 in April. “The FTC lacks substantive rulemaking authority with respect to unfair methods of competition," Brown wrote. She went on to write that “the role of an administrative agency is to do as told by Congress, not to do what the agency think(s) it should do."

Business groups, including the Big “I", agreed with that assessment. They argued that Congress never intended to give the FTC such broad powers and questioned whether they possessed the statutory authority to promulgate such a rule.

In response, the FTC said it will continue to try to stop noncompete agreements. "We are seriously considering a potential appeal, and today's decision does not prevent the FTC from addressing noncompetes through case-by-case enforcement actions," said an FTC spokesperson in a statement.

Nathan Riedel is Big “I" senior vice president, federal government affairs.