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Business Groups Sue FTC To Block Ban On Noncompete Clauses
https://www.whatjobs.com/news/usa/us-business-news/business-groups-sue-ftc-to-block-ban-on-noncompete-clauses
By Nithya Bose in Business News, posted April 25, 2024
The US Chamber of Commerce and other business groups have sued the Federal Trade Commission (FTC) after it decided to ban noncompete clauses.
The ban would prevent employers from stopping employees from working for rival companies.
Filed in US District Courts in Texas, these lawsuits argue the FTC has exceeded its regulatory authority.
The FTC finalized a rule prohibiting noncompete agreements through a narrow 3-to-2 vote, with Republican commissioners dissenting.
The Chamber of Commerce claimed the rule represented "a vast overhaul of the national economy.2
It says the FTC lacks the authority to enforce such a sweeping ban.
The Business Roundtable, the Texas Association of Business, and the Longview Chamber of Commerce are joining the Chamber in this legal challenge.
Separately, Ryan LLC, a Dallas-based tax services firm, filed a similar lawsuit, raising concerns akin to those of the Chamber.
Represented by Eugene Scalia, the former Secretary of Labor under the Trump administration, Ryan LLC emphasized the FTC's rule's overreach.
FTC spokesman Douglas Farrar said: “Our legal authority is crystal clear.
“Addressing noncompetes that curtail Americans’ economic freedom is at the very heart of our mandate, and we look forward to winning in court.”
Both lawsuits were filed to be heard by Trump-appointed District Court judges.
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Any subsequent appeals are directed to the Fifth Circuit Court of Appeals, known for its conservative leanings.
Debbie Berman, a management-side lawyer, said the issue of the FTC’s authority over noncompete clauses would escalate to the Supreme Court.
The FTC's new rule is set to take effect 120 days after publication in the Federal Register.
It nullifies existing noncompete agreements except those involving high-level executives.
“Addressing noncompetes that curtail Americans’ economic freedom is at the very heart of our mandate, and we look forward to winning in court”
It also precludes companies from forming new noncompete agreements, even with top executives.
The rule garnered support from labor unions like the AFL-CIO.
However, it faced opposition from business-oriented groups like the Securities Industry and Financial Markets Association and the American Trucking Associations.
These groups argue that noncompetes are essential for protecting trade secrets and investment in employee training.
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