US Chamber vows fight against FTC ban on noncompete clauses

The U.S. Chamber of Commerce plans to take the Federal Trade Commission (FTC) to court over its proposed rule to ban noncompete agreements that restrict employees from switching jobs.

Chamber CEO Suzanne Clark said that the corporate lobbying group will “oppose the proposed regulation with all the tools at our disposal, including litigation” in a Wall Street Journal opinion piece.

“If the FTC can regulate noncompete agreements without authorization from Congress, there is no aspect of employment or commercial arrangements that it doesn’t have the authority to regulate or ban arbitrarily,” Clark wrote. 

The FTC, led by Chairwoman Lina Khan, an outspoken opponent of corporate power, rolled out the proposed noncompete ban earlier this month. 

The commission said that the rule could provide workers with $300 billion in wages that were lost because noncompetes blocked them from finding a new job or starting their own company. 

“Every worker stuck in a job represents a position that isn’t opening up for someone else. And if employers know their workers can’t leave, they have less incentive to offer competitive pay and benefits, which puts downward pressure on wages for everyone,” Khan wrote in a recent New York Times column. 

Around 1 in 5 workers are subject to noncompete clauses, according to federal government estimates. While these agreements are common in high-paying law and tech jobs, they’re also used in industries like retail and construction, according to the White House.

The proposal went further than legal experts expected. Many predicted that the FTC would attempt to place restrictions on noncompetes rather than ban them entirely.

The FTC said that it has the authority to regulate noncompetes under a law directing the agency to combat unfair methods of competition. 

Clark wrote that the Chamber must fight the proposed rule to prevent a precedent that would empower the FTC to expand its regulation into other areas, such as blocking companies of a certain size from making acquisitions. 

“This fight is about much more than the fate of noncompete agreements,” Clark wrote. 

Several legal experts and the FTC’s lone GOP commissioner predict that the FTC rule won’t survive legal challenges, particularly if it comes before the Republican-dominated Supreme Court. 

“Today’s proposed rule will lead to protracted litigation in which the Commission is unlikely to prevail,” Republican FTC Commissioner Christine Wilson said in a statement earlier this month.