New lawsuit takes aim at FTC’s non-compete ban

A new lawsuit filed by the U.S. Chamber of Commerce could overturn federal authorities’ decision to ban employers from requiring non-compete clauses in most contracts.

When the Federal Trade Commission (FTC) issued its final rule on Tuesday to ban non-compete agreements nationwide, the intention was that it would protect workers’ fundamental freedom to change jobs, increase innovation and encourage the formation of new businesses would promote.

However, the U.S. Chamber of Commerce, the nation’s largest business lobby, announced the same day that it would file a lawsuit to block the agency’s ruling. The House filed a lawsuit on Wednesday.

According to a statement, the Chamber claims that the FTC’s final ruling was “not only unlawful, but a blatant power grab that will undermine the ability of American companies to remain competitive.”

“Since its inception more than 100 years ago, the FTC has never been given the constitutional and statutory authority to write its own competition rules,” said Suzanne Clark, president and CEO of the U.S. Chamber of Commerce.

“Non-compete agreements are enforced or waived under established state laws governing their use,” she said. “Yet today, three unelected commissioners unilaterally decided that they have the power to declare what is a legitimate business decision and what is not, by banning non-compete agreements in all sectors of the economy.”

In response to the Chamber’s allegations, FTC spokesman Douglas Farrar said federal law was “crystal clear” about the agency’s power to prevent unfair methods of competition.

“Tackling non-compete agreements that restrict Americans’ economic freedom is at the core of our mandate, and we look forward to winning in court,” Farrar said in a statement reported by CNBC.

According to FTC Chair Lina Khan, companies with non-compete clauses in their employment contracts stifle new ideas, stifle wage growth and rob the U.S. economy of dynamism. By banning non-compete agreements, Khan said the organization protects American workers’ fundamental freedom to change jobs, increases innovation and promotes new business formation.

“The FTC’s final rule to ban non-competitors will ensure that Americans have the freedom to find a new job, start a new business or bring a new idea to market,” Khan said in a statement. statement announcing the new rule.

Before finalizing its ruling, the FTC estimated that the ban would increase new business formation by 2.7% per year, which amounts to approximately 8,500 additional new businesses per year. FTC estimates also indicate that worker wages will increase by $524 per year over the next decade and health care costs will decrease by $194 billion.

Finally, the agency estimates that more than 10,000 new patents will be filed annually under the ruling over the next decade.

Although the ruling brings some business-related benefits, the Chamber states that the decision “sets a dangerous precedent for government micromanagement of business” and “could harm employers, workers and our economy.”

“Companies will face significant legal costs as they are forced to resort to other tools to protect their investments,” the Chambers’ lawsuit reads. “And the economy as a whole will suffer because startups and small businesses cannot prevent dominant companies from hiring their best employees and gaining access to their confidential information.”

The final rule, approved by a 3-2 vote, will become effective 120 days after it is published in the Federal Register.