FTC ban on worker noncompete agreements blocked by federal judge

A sweeping federal ban on noncompete agreements -- which was set to take effect for tens of millions of Americans nationwide on Sept. 4 -- is now permanently on hold.

In a ruling Tuesday, a federal judge in Texas upheld a challenge to the FTC's rule banning noncompetes, saying the government agency lacks the authority to put the ban in place.

An estimated 30 million Americans -- 1 out of every 5 workers -- are employed with noncompete agreements in industries ranging from tech to fast food. The FTC argues the agreements stifle workers' ability to switch jobs and earn higher wages.

The FTC rule would have meant that anyone applying for a new job could not be forced to sign a noncompete. For workers with existing agreements, noncompetes would no longer be enforceable.

The decision from U.S. District Judge Ada Brown means those changes are effectively blocked.

In a statement to ABC News, FTC spokesperson Victoria Graham said the agency is "seriously considering a potential appeal" of the decision.

"We are disappointed by Judge Brown's decision and will keep fighting to stop noncompetes that restrict the economic liberty of hardworking Americans, hamper economic growth, limit innovation, and depress wages," Graham said.

The lawsuit was filed by the U.S. Chamber of Commerce along with a Texas tax firm, which argued that the rule was too broad and that the FTC overstepped its authority.

"This decision is a significant win in the Chamber's fight against government micromanagement of business decisions. A sweeping prohibition of noncompete agreements by the FTC was an unlawful extension of power that would have put American workers, businesses, and our economy at a competitive disadvantage," U.S. Chamber of Commerce President and CEO Suzanne Clark said in a statement.