A federal judge in Texas has stopped a new rule from the Federal Trade Commission that would have simplified the process for employees to leave their jobs and join a competitor.

In a ruling on Tuesday, U.S. District Judge Ada Brown granted a request for a summary judgment filed by the U.S. Chamber of Commerce and other plaintiffs. The judge also denied the FTC's own request for a judgment in their favor.

In making his decision, Brown concluded that the FTC “exceeded its legal authority” by creating the rule. The judge called the rule “arbitrary and capricious." He also found that the rule would cause significant harm.

As a result of the court's decision, the FTC is unable to enforce their rule, which was scheduled to take effect on September 4th.

However, the ruling doesn't prevent the agency from addressing noncompete agreements through “case-by-case” enforcement, said Victoria Graham, an FTC spokesperson.

The FTC is also considering appealing the court's decision, Graham stated.

The Federal Trade Commission voted in April to ban employers nationwide from creating new non-compete clauses in employment agreements or enforcing existing ones. The agency stated that these agreements restrict workers' mobility and suppress their earnings.

However, businesses opposing the ban contend that they need non-compete agreements to safeguard business connections, protect confidential information, and recoup investments made in training or recruiting employees.

Besides the Texas lawsuit, companies have challenged the FTC's rule in Florida and Pennsylvania, seeking to halt its implementation.

In the Florida case, initiated by a retirement community, the court granted a temporary injunction, preventing the rule's enforcement solely for the plaintiff, but not for any other company.

In the Pennsylvania lawsuit, the court found that the plaintiff, a tree service company, failed to demonstrate that it would suffer irreparable harm from the ban and that the company was unlikely to prevail in the case.

The conflicting rulings suggest that the matter could ultimately reach the U.S. Supreme Court for a final decision.