Experts say the U.S. Federal Trade Commission’s ban on “non-compete” agreements commonly signed by workers is likely vulnerable to legal challenges, with some courts ruling He said he was increasingly skeptical of the agency’s authority to adopt broad rules.
The commission announced the rule on Tuesday, saying that agreements not to join or start a competing business with an employer suppress workers’ wages and hinder worker mobility and employment opportunities. Stated.
According to the agency, about 30 million people, or 20% of U.S. workers, have signed non-compete clauses.
A trade association led by the U.S. Chamber of Commerce, tax services firm Ryan LLC, and a Pennsylvania logging company says the antitrust agency, the FTC, does not have the authority to determine what business practices constitute unfair competition. He has already filed three lawsuits. Should be banned.
The chamber moved late Wednesday to block the rule from taking effect pending the outcome of the lawsuit.
These challenges are likely to delay the implementation of the rules, which are scheduled to take effect in August.
Lawyers and other experts say the FTC is taking a novel and unprecedented position regarding its rulemaking authority that could ultimately doom the measure.
Lawyers say the FTC’s rules could be invalidated because they address “serious issues” that have far-reaching implications for the U.S. economy. The U.S. Supreme Court has held that government agencies cannot proceed without the express authorization of Congress.
Jeremy Merkelson, a partner at the Washington, D.C., law firm Davis Wright Tremaine who represents employers, said the FTC lacks that authority and Congress itself refuses to pass noncompete laws. Stated.
“I think the Supreme Court has everything it needs to rule that the Federal Trade Commission’s big move was not green lighted by the Legislature,” Merkelson said.
The committee will also have to contend with a group of conservative judges (including the conservative majority on the Supreme Court) who have shown a willingness to block major government policies and curb the power of federal agencies. .
The Tyler, Texas, court where the Chamber of Commerce filed its lawsuit has been a “very effective firewall against questionable Biden administration rulemaking,” said Gregory, director of labor and employment policy at the business-backed HR Policy Institute.・Mr. Hof stated.
The court’s sole judge, J. Campbell Barker, is an appointee of former Republican President Donald Trump.
Ryan’s case was assigned to another Trump appointee, U.S. District Judge Ada Brown in Dallas.
Appeals from those cases will now be heard by the New Orleans-based 5th Circuit Court of Appeals, where 12 of the court’s 17 judges were appointed by Republican presidents.
In a statement responding to the lawsuit Wednesday, the FTC said federal law is “clear” that the agency has broad rulemaking authority to address anticompetitive conduct.
The commission also defended the authority of the 570-page rule itself, requiring fuel distributors to determine “octane ratings” for gasoline and mail-order companies and to ship products within advertised limits. It relied heavily on U.S. Court of Appeals decisions in 1973 and 1985 that upheld the agency’s mandated rules. time frame.
But these rules are not as broad as noncompetes that extend to all sectors of the economy, and the Fifth Circuit has argued on behalf of employers and businesses that it is not obligated to follow previous rulings from other appeals courts. said New York-based attorney Damien Cavalleri. Worker.
“It’s likely that there will be a split in the Fifth Circuit, and it will go all the way to the Supreme Court. I don’t think[the court’s conservative majority]will shy away from addressing this issue,” he said. Ta.
