In this episode of his "Clearly Conspicuous" podcast series, consumer protection attorney Anthony DiResta discusses the U.S. Chamber of Commerce's decision to sue the Federal Trade Commission (FTC) over its rule banning non-compete clauses in employment agreements. Mr. DiResta examines the Chamber's argument that the FTC overstepped its authority in issuing the rule and the key debate around whether non-competes protect businesses or suppress worker wages and mobility. He also explores if the FTC has clear legal authority to address non-competes.
Podcast Transcript
Good day and welcome to another podcast of Clearly Conspicuous. As we've noted previously, our goals in these sessions is to make you succeed in a very aggressive and progressive governmental environment, make you aware of what's going on and give you tips for success. It's a privilege to be with you today.
The FTC Is Being Sued for Its Rule Banning Non-Compete Clauses in Employment Agreements
Today, we discuss actions by the U.S. Chamber of Commerce and others to sue the FTC concerning its rule to ban non-compete clauses in employment agreements. The U.S. Chamber of Commerce President and CEO Suzanne Clark issued the following statement immediately following the Federal Trade Commission final vote to ban employer non-compete agreements. And as I read this quote, it really reflects the sentiment by other groups as well. So here it goes:
"The Federal Trade Commission decision to ban employer noncompete agreements across the economy is not only unlawful, but also a blatant power grab that will undermine American businesses and their ability to remain competitive. Since its inception over 100 years ago, the FTC has never been granted the constitutional and statutory authority to write its own competition rules. Noncompete agreements are either upheld or dismissed under well-established state laws governing their use. Yet today, three unelected commissioners have unilaterally decided that they have the authority to declare what's a legitimate business decision and what's not. By moving today on noncompete agreements in all sectors of the economy, this decision sets a dangerous precedent for government micromanagement of business, and it can harm employers, workers and our economy. The chamber will sue the FTC to block this unnecessary and unlawful rule, and put other agencies on notice that such overreach will not go unchecked."
Indeed. That's quite a mouthful, Well, the next day, the Chamber of Commerce fulfilled its promise to sue the FTC, arguing in a lawsuit that the agency overstepped its authority. The lawsuit, filed in the U.S. district court in Texas, argued that the FTC did not have the authority to issue rules that define unlawful methods of competition. The Chamber of Commerce was joined by three other business groups, the Business Roundtable, the Texas Association of Businesses and the Longview Chamber of Commerce. Again, the suit came a day after the FTC announced a final rule to ban the non-compete agreements. The rule was approved in the 3- to-2 vote, with both Republican commissioners voting against the measure. Ryan LLC, a tax services firm in Dallas, also sued the FTC, generally raising similar arguments in a lawsuit filed in another U.S. district court in Texas. Ryan is represented by Eugene Scalia, a partner at Gibson Dunn who was a Secretary of Labor during the Trump Administration. However, an FTC spokesman said in a statement the Congress empowered the agency to prevent unfair methods of competition, which it believes includes non-compete agreements. He said, "our legal system in authority is crystal clear, addressing non-compete that curtail Americans economic freedom is at the very heart of our mandate, and we look forward to winning in court."
Key Takeaway
So here's the key takeaway. Companies generally use non-compete to protect trade secrets and to avoid spending money to train employees who can hop over to a competitor. The FTC and worker advocates say that non-compete agreements suppress competition for labor, pushing down wages. The agency's role was supported by unions including the AFL-CIO and North America's Building Trades Unions. Business groups opposing the rule included the Securities Industry and Financial Markets Association , a trade organization that represents Wall Street, and the American Trucking Association. Laura Padin, a lawyer at the National Employment Law Projects said a sympathetic Supreme Court had "emboldened businesses to bring more challenges to agencies power. By arguing that every regulation should be explicitly ordered by Congress, which often deadlocks on legislation, business groups are essentially asking not to be subject to any new requirements. What we've seen in this resurgence of corporations challenging the basic authority of administrative agencies to do their tasks." Interesting developments and we'll keep you posted, as well as to address other key issues and developments and provide strategies for success. I wish you continued success and a meaningful day. Thank you.
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