Business Groups Sue to Stop F.T.C. From Banning Noncompete Clauses

The U.S. Chamber of Commerce fulfilled its promise to sue the Federal Trade Commission over a ban on agreements that prevent workers from leaving a company for a rival, arguing in a lawsuit filed Wednesday that the agency overstepped its authority.

The lawsuit, filed in a U.S. District Court in Texas, argued that the F.T.C. did not have 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 Business and the Longview Chamber of Commerce.

The suit came a day after the F.T.C. announced a final rule to ban the noncompete agreements. The rule was approved in a 3-to-2 vote, with both Republican commissioners voting against the measure.

The Chamber of Commerce vowed to challenge the rule shortly after the vote. Its lawsuit called the ban “a vast overhaul of the national economy, and applies to a host of contracts that could not harm competition in any way.” It said the agency didn’t have the power to issue a ban and, even if it did, a categorical ban on such agreements wasn’t lawful.

Ryan LLC, a tax services firm in Dallas, also sued the F.T.C., 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 secretary of labor during the Trump administration.

Douglas Farrar, an F.T.C. spokesman, said in a statement that Congress empowered the agency to prevent “unfair methods of competition,” which it believes includes noncompete agreements.