Groups sue to block FTC’s new rule barring noncompete agreements


The U.S. Chamber of Commerce and other business groups on Wednesday sued the Federal Trade Commission over a new rule that would make most noncompete agreements illegal, setting up a potential showdown over the scope of a federal agency’s authority.

The lawsuit, filed in a federal court for the Eastern District of Texas, comes a day after the FTC voted 3-2 to issue a rule that bans noncompete agreements, clauses that restrict workers from switching employers within their industry. The agency estimates some 30 million workers are bound by the agreements. Proponents of the FTC’s new rule have argued that it would buoy wages and free up labor markets.

But the chamber argues in its lawsuit that the agency lacks the authority to issue such a sweeping and consequential rule, and it is asking the court to overturn it.

“The Commission’s astounding assertion of power breaks with centuries of state and federal law and rests on novel claims of authority by the Commission,” the lawsuit states.

The FTC on Wednesday defended its stance on rulemaking. The agency’s authority to issue the noncompete rule is “crystal clear” said Douglas Farrar, an FTC spokesman.

“This authority has repeatedly been upheld by courts and reaffirmed by Congress,” he said. “Addressing noncompetes that curtail Americans’ economic freedom is at the very heart of our mandate, and we look forward to winning in court.”

This is a developing story and will be updated.

Share post:


More like this