Business groups led by the U.S. Chamber of Commerce have filed a lawsuit against the Federal Trade Commission (FTC) over its decision to ban noncompete agreements. The FTC voted 3-2 Tuesday to pass the rule blocking new noncompete agreements, arguing that it will allow millions of workers to change jobs within their industry and earn more money.
Business groups, however, say noncompete agreements are necessary to protect intellectual property and accuse the FTC of regulatory overreach. They argue that these agreements benefit both employers and workers, as employers can protect their workforce investments and sensitive information, while workers can benefit from increased training, access to more information, and an opportunity to bargain for higher pay.
The lawsuit also alleges that the FTC does not have the authority to regulate noncompete agreements on a nationwide basis, as this has historically been governed by state laws. The Chamber, Business Roundtable, Texas Association of Business, and Longview Chamber of Commerce filed the lawsuit against the FTC in the U.S. District Court for the Eastern District of Texas.
The new rule was supposed to go into effect in 120 days, but the lawsuit will extend that timeline. The Chamber has been at the forefront of legal challenges to Biden administration policies that take aim at big business, having recently sued the Consumer Financial Protection Bureau over a new rule capping credit card late fees.
While whether these cases get resolved before the 2024 presidential election remains to be seen, they do draw a stark comparison between President Biden and the presumptive Republican nominee, former President Trump. Biden has supported the FTC’s ban on noncompete agreements, while Trump has criticized the move as hurting businesses. The move to ban noncompete agreements has been celebrated by many workers and labor rights advocates, but it has angered major players in the business community.
The Chamber President and CEO, Suzanne Clark, has argued that the FTC has overstepped its authority by unilaterally declaring what is a legitimate business decision and what is not. She has also emphasized that noncompete agreements are important for protecting essential investments in employees, R&D, and innovation.
Business Roundtable CEO Joshua Bolten has called the noncompete ban ‘misguided and far beyond the agency’s statutory authority.’ He believes that reasonable noncompete agreements protect investments in workers and make it easier for companies to compete globally.
The FTC’s decision to ban noncompete agreements is a significant development that has drawn strong reactions from both sides. The outcome of the lawsuit filed by business groups will be closely watched, as it could have implications for the future of noncompete agreements in the United States.
