FTC is sued by business groups over its ban on noncompete agreements, which may delay enforcement

Less than 24 hours after the Federal Trade Commission issued a final rule this week banning employers from using noncompete agreements in the United States, the US Chamber of Commerce and the Business Roundtable filed a lawsuit against the agency in federal court in the Eastern District of Texas.

Less than 24 hours after the Federal Trade Commission issued a final rule this week banning employers from using noncompete agreements in the United States, the US Chamber of Commerce and the Business Roundtable filed a lawsuit against the agency in federal court in the Eastern District of Texas. Another lawsuit was filed in federal court in the Northern District of Texas by business tax services firm Ryan. And more may be filed in the coming weeks. “We think it’s likely additional lawsuits could be filed,” said employment lawyer Daniel Turinsky, a partner at DLA Piper. Even before the rule was issued, the US Chamber had promised to sue on grounds that, in its view, the agency exceeded its administrative authority by outlawing what it deems “unfair methods of competition.” The suit argues that without a clear legislative mandate from Congress, the FTC does not have the power to issue and enforce its blanket noncompete ban. “The FTC contends that by using regulation they can simply declare common business practices to be ‘unfair methods of competition’ and thus illegal. This is despite the fact that noncompete agreements have been around longer than the 110-year-old FTC and until now no one has suggested that they are illegal,” the US Chamber said in a release announcing the lawsuit. “If the FTC can regulate noncompete agreements, then they can decide to regulate or even ban any other business practice. All without a vote from Congress.”