In a controversial move, the Federal Trade Commission (FTC) voted 3-2 to ban most non-compete agreements, which prevent roughly one in five American workers from switching jobs within their industry, according to a report in The Hill.
The decision has prompted the US Chamber of Commerce to announce its intention to challenge the ban in court, setting the stage for a high-stakes legal showdown.
The FTC argues that non-compete agreements unfairly limit workers’ ability to change jobs and stifle competition in the labor market.
The ban has garnered support from labor organizations such as the AFL-CIO and the Service Employees International Union.
However, the US Chamber of Commerce and other business groups contend that the FTC has overstepped its authority with this sweeping ban.
FTC bans most non-compete clauses, claiming the accounts 'robbed people of their economic liberty' https://t.co/A9f0Y1IF5d pic.twitter.com/ctku4cPCGB
— Daily Mail Online (@MailOnline) April 23, 2024
They argue that the agency lacks the necessary rulemaking authority and express concern that this rule could lead to the FTC micromanaging various aspects of the economy.
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The Chamber’s planned lawsuit against the FTC is expected to highlight the agency’s perceived overreach and the potential consequences of allowing such broad rulemaking powers.
Many legal experts anticipate that the courts will side with the Chamber, given the Supreme Court’s recent skepticism towards agency overreach in cases involving “major questions” that require explicit congressional authorization.
The outcome of this legal battle will determine the future of non-compete agreements in the United States and set a precedent for the extent of the FTC’s rulemaking authority.
While the agency estimates that the ban could increase US earnings by at least $400 billion over the next decade, opponents argue that it will limit companies’ ability to protect confidential information and create uncertainty in the business landscape.
One thing is certain though, this is going to be tied up in court for a long time.
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Also given the fact that the courts struck this down before there likely will be a stay on the rule pending the outcome of litigation.
Image source (cropped): Flickr
