The Federal Trade Commission’s (FTC) decision to ban noncompete agreements has sparked a legal challenge from business groups led by the U.S. Chamber of Commerce. The FTC rule, which was set to go into effect in 120 days, would prohibit employers from entering into new noncompete agreements and require them to rescind existing ones. The agency contends that the ban will benefit workers by allowing them to change jobs within their industry and earn more money. The FTC estimates that around 30 million people, or 18 percent of the U.S. workforce, are currently subject to noncompete agreements.
The business groups argue that noncompete agreements are necessary to protect intellectual property and confidential business information. They also argue that the FTC has overstepped its authority by imposing a nationwide ban on noncompete agreements. Noncompete agreements are currently governed by state laws, which vary from state to state.
The lawsuit was filed in the U.S. District Court for the Eastern District of Texas. The Chamber has been at the forefront of legal challenges to Biden administration policies that take aim at big business. Last month, the Chamber sued the Consumer Financial Protection Bureau to block a new rule that would cap credit card late fees levied by the largest issuers at $8.
The legal challenge to the FTC’s noncompete ban is expected to delay its implementation. Whether the case gets resolved before the 2024 presidential election remains to be seen.
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 U.S. Chamber of Commerce, which represents over 3 million businesses, has called the ban ‘a radical and unlawful attempt to rewrite the law.’ The Chamber argues that noncompete agreements are necessary to protect intellectual property and trade secrets.
The FTC’s ban on noncompete agreements is a significant development that could have a major impact on the U.S. economy. The legal challenge from business groups is likely to prolong the debate over the legality and necessity of noncompete agreements.
