Tyler, Texas – The U.S. Chamber of Commerce has taken legal action against the Federal Trade Commission (FTC) regarding the agency’s ban on noncompete agreements. In a lawsuit filed in a federal court, the Chamber argues that the FTC overstepped its authority in implementing this sweeping regulation.
According to the Chamber, the recent 3-2 vote by the FTC, supported by the agency’s majority Democratic commissioners, could have negative implications for American businesses’ competitiveness. They believe that there are already existing legal frameworks to determine the validity of noncompete agreements, and that this new regulation would undermine businesses across various sectors.
The FTC’s ban on noncompete agreements, which was released recently and is set to take effect in August, aims to prevent employees from leaving their current company to work for a competitor. This practice, commonly seen in more senior positions, has also been applied to lower-level workers in retail and food service industries.
While the rule allows existing noncompetes for senior executives to remain in place, it deems noncompetes for other workers as unenforceable. The U.S. Chamber of Commerce’s CEO, Suzanne Clark, strongly criticized the decision, labeling it as a “blatant power grab” that will hinder American businesses’ ability to stay competitive.
Clark emphasized that the FTC does not have the legal authority to create its own competition rules, which have traditionally been upheld or dismissed under state laws. She pointed out that three unelected commissioners cannot unilaterally dictate what constitutes a legitimate business decision by banning noncompete agreements across all sectors of the economy.
In response, an FTC spokesperson defended the agency’s authority, stating that their mandate includes addressing practices like noncompetes that restrict Americans’ economic freedoms. They are confident in their legal position and look forward to prevailing in court.
The Chamber’s lawsuit against the FTC is just one of several challenges expected to be filed against the new rule. Ryan LLC, a tax service firm, was the first to file a legal challenge in a separate federal court in Texas. The outcome of these legal battles will have significant implications for the future of noncompete agreements in the United States.