On Tuesday, Judge Ada Brown of the U.S. District Court for the Northern District of Texas issued a nationwide injunction, ruling that the Federal Trade Commission (FTC) lacked the authority to implement a non-compete ban without Congressional approval. In her decision, Judge Brown stated, “The Court concludes that the FTC lacks statutory authority to promulgate the Non-Compete Rule, and that the Rule is arbitrary and capricious. Thus, the FTC’s promulgation of the Rule is an unlawful agency action.”

The FTC’s proposed rule, which could potentially affect an estimated 30 million Americans, aims to enhance freedom and mobility within competitive industries. The FTC argues that this rule would counteract a detrimental economic trend caused by non-compete agreements. In contrast, businesses maintain that such agreements are essential for fostering growth, innovation, and competition.

The case, Ryan LLC v. FTC, is just one of many legal challenges confronting the FTC’s new rule. The nationwide scope of the injunction is particularly significant, as it prevents the rule’s enforcement across the entire country, not just in Texas.

Adding to the FTC’s challenges is the recent Supreme Court ruling in Loper Bright Enterprises v. Raimondo, which overturned decades of judicial deference to federal agency interpretations of legislation. Under the previous Chevron framework, federal agencies were granted broad discretion in interpreting ambiguous laws without explicit Congressional guidance.

The order is likely to be appealed to the U.S. Court of Appeals for the Fifth Circuit. However, as of now, the FTC is prohibited from enforcing the rule against any employer nationwide.