Purdue Global prof talks about future of noncompete agreements
(WISH) — The future of noncompete agreements remains uncertain after a federal judge in Texas recently blocked a rule from the Federal Trade Commission that aimed to make it easier for employees to leave their jobs and work for competitors.
The decision could have significant implications for workers and businesses.
Scott Johnson, a professor at Purdue Global Law School, joined “Daybreak” to discuss the ruling and its potential impact. The Biden administration had supported the FTC rule, claiming it would grant workers more rights and lead to higher wages. However, the judge struck down the rule on two key grounds.
“One basis for the ruling was that the agency lacked the statutory authority to implement the rule,” Johnson said. “The other was that, even if the authority existed, the action was deemed arbitrary and capricious because the agency had other methods to address non-competes, such as case-by-case enforcement.”
While Indiana has already banned noncompete agreements for primary care doctors, many business owners continue to support these contracts as a means of retaining employees. “From a business perspective, noncompetes help employers keep employees after investing in their training,” Johnson said. “These agreements prevent employees from joining competitors for a certain period after leaving their job.”
The Biden administration is weighing its options in response to the ruling, which could include filing an appeal.
“The administration could also focus on case-by-case enforcement, leading the FTC to prosecute more noncompete claims,” Johnson said.
The legal battle could continue for some time. “If there is an appeal, it would first go to an appellate court. Additionally, there are other related cases in federal districts like Florida and Pennsylvania that could also end up before the Supreme Court,” Johnson said.
For states, including California, that have already banned noncompete agreements, the federal ruling would not affect existing state laws.
“State noncompete laws, like Indiana’s ban on agreements with primary care doctors, remain in place,” Johnson said.