(PartiallyPolitics.com) – The U.S. Chamber of Commerce, a major business lobby, filed a lawsuit against the Federal Trade Commission (FTC) to challenge a new rule that nearly bans noncompete agreements. The lawsuit, initiated in Tyler, Texas, argues that the FTC overstepped its authority by imposing the ban, which is scheduled to take effect in August. The Chamber contends that the FTC is authorized to enforce existing antitrust laws, not to create new regulations defining anti-competitive behaviors.
The Chamber of Commerce’s legal action followed a similar lawsuit by Ryan LLC, a tax service firm, marking the beginning of what could be extensive legal challenges to the FTC’s ruling. These challenges are anticipated to delay the rule’s implementation, potentially pending further court decisions.
The FTC’s rule aims to curb the widespread use of noncompete clauses, particularly in industries with traditionally lower wages such as fast food and retail. Proponents of the rule, including Democrats and worker advocates, argue that noncompete agreements restrict wage growth and job mobility, thereby suppressing worker earnings. According to the FTC, eliminating these agreements could boost worker earnings by up to $488 billion over ten years and facilitate the creation of over 8,500 new businesses annually.
However, many business groups and Republicans defend the use of noncompete agreements as essential for protecting confidential business information and investments in employee training. The U.S. Chamber of Commerce warns that without noncompete clauses, companies will incur significant legal costs as they seek alternative methods to safeguard their investments, ultimately harming the economy and disadvantaging small businesses and startups against larger corporations.
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