Employers scored a recent victory as the bid by the Federal Trade Commission to ban noncompete agreements was rejected by a federal judge in Texas. The FTC federal rule was set to be enforced on Sept. 4. The FTC says roughly 30 million, or 1 in 5 workers, are subject to noncompete agreements.

The court’s ruling prohibits the FTC from enforcing the noncompete ban and provides nationwide relief for employers. Still, the decision does not prevent the agency from addressing noncompete agreements through “case-by-case” enforcement actions, said Victoria Graham, an FTC spokesperson. The FTC is also considering appealing the court’s decision, Graham said.

In Ryan LLC v. Federal Trade Commission, Judge Ada Brown (U.S. District Court for the Northern District of Texas) granted a motion for summary judgement filed by the U.S. Chamber of Commerce and other plaintiffs and rejected the FTC’s own petition for a judgement in its favor. Brown concluded that that the FTC “exceeded its statutory authority” in making the rule.

Judge Brown also concluded that the rule would cause irreparable harm.

Ryan is the same case in which Judge Brown issued a preliminary injunction, partially blocking the federal ban in July. Unlike the court’s earlier ruling which only applied to the parties in the lawsuit, the Aug. 20 judgment applies to all employers and employees across the country.

Labor and employment attorneys weigh in on judgment

“This is big news for employers and employees alike, and it eliminates (for now) much of the uncertainty which had been caused by the FTC’s nationwide ban on noncompete agreements that had been set to go into effect on Sept. 4,” said Timothy Brinks, a partner in the New Orleans office of Adams & Reese. “But this court ruling does not necessarily mark the end of the road for potential federal regulation of noncompetes. The FTC will likely appeal this ruling, and it’s possible this could spur renewed efforts at the federal level to pass legislation restricting the use of noncompete agreements.”

The FTC federal rule was originally published in April. It would prohibit employers nationwide from entering into new noncompete agreements or enforcing existing noncompetes, saying the agreements restrict workers’ freedom and suppress wages. But companies opposing the ban argue they need noncompete agreements to protect business relationships, trade secrets and investments they make to train or recruit employees.

In addition to the Texas case, companies in Florida and Pennsylvania also sued the FTC to block the rule. Ryan, LLC is a tax services firm based in Dallas and uses noncompete agreements and nondisclosure agreements to ensure employees don’t share trade secrets when they leave. In the Florida lawsuit, which was brought by a retirement community, the court granted a preliminary injunction, prohibiting enforcement of the rule just for the plaintiff. In the Pennsylvania lawsuit, the court concluded that the plaintiff, a tree company, failed to show it would be irreparably harmed by the ban and that the company wasn’t likely to win the case.

Stay tuned. This issue could travel all the way up to the United States Supreme Court.

The Associated Press contributed to this story.