U.S. Chamber challenges noncompete agreements ban

By Ioannis Pashakis

The U.S. Chamber of Commerce moved to challenge the Federal Trade Commission’s new ruling that bans almost all noncompete agreements.

The ruling, voted 3-2 by the FTC and announced Tuesday, requires companies with existing noncompete agreements to inform current and past employees that they will not enforce those agreements.

The Chamber’s lawsuit, filed Wednesday in a Texas federal court, alleges that the FTC lacks the power to adopt the rule.

The Chamber called the ruling a dangerous precedent for government micromanagement of business.

“The Federal Trade Commission’s decision to ban employer noncompete agreements across the economy is not only unlawful but also a blatant power grab that will undermine American businesses’ ability to remain competitive,” President and CEO Suzanne P. Clark said.

Under the Noncompete Clause Rule, existing noncompetes for the vast majority of workers will no longer be enforceable. There is an exception for those for senior executives, but employers will be banned from entering or trying to enforce any new agreements, the FTC said.

FTC Chair Lina M. Khan said the ban will give Americans the freedom to pursue new jobs, start new businesses or bring new ideas to market.

“Noncompete clauses keep wages low, suppress new ideas and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” Khan said.

The FTC first proposed the rule in early 2023. During the proposed rule’s 90-day public comment period, the FTC received over 26,000 comments with over 25,000 in support of the ban.