Chamber of Commerce Sues to Block FTC Ban on Anti-Worker Noncompete Agreements

The powerful U.S. Chamber of Commerce sued the Federal Trade Commission on Wednesday in an effort to block the agency's widely celebrated new rule banning most noncompete clauses, pervasive contract agreements that restrict employees' ability to work for or start a competing business.

The Chamber filed its lawsuit alongside the Business Roundtable and other corporate lobbying groups in a federal court in Texas. The suit came shortly after Ryan LLC, a tax service firm, filed the first legal challenge to the FTC's rule in a separate Texas venue.

"The commission's categorical ban on virtually all non-competes amounts to a vast overhaul of the national economy," reads the Chamber's complaint against the rule, which the FTC finalized in a 3-2 vote on Tuesday.

The agency, led by Biden-appointed Commissioner Lina Khan, estimates that roughly 30 million U.S. workers are subject to a noncompete agreement, limiting their ability to start their own companies or switch jobs in pursuit of better wages and benefits.

"Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned," Khan said in a statement Tuesday. "The FTC's final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market."

"Noncompetes are about reducing competition, full stop. It's in their name."

The Chamber, the largest corporate lobbying organization in the United States, signaled its intent to sue the FTC immediately after the agency finalized its new rule on Tuesday.

"The Federal Trade Commission's decision to ban employer noncompete agreements across the economy is not only unlawful but also a blatant power grab that will undermine American businesses’ ability to remain competitive," Chamber president and CEO Suzanne Clark said in a statement following the FTC's vote.

While the organization claims to fight for the interests of businesses small and large, a Public Citizen report published earlier this year found that the majority of the Chamber's legal work supports big corporations.

The Chamber acknowledged in response to questioning from a pair of Democratic senators last year that its corporate members use noncompete clauses—though the group did not specify which members.

"Why does the U.S. Chamber of Commerce hate dynamism in the American economy, where workers are free to move to the best opportunities, and companies are free to recruit the best talent?" asked University of Massachusetts Amherst economics professor Arin Dube in response to the Chamber's pledge to sue over the FTC's rule.

According to the FTC, its ban would boost the average U.S. worker's earnings by $524 a year, increase new business formation by close to 3% annually, and lower national healthcare costs by nearly $200 billion over the next decade.

"Noncompetes are about reducing competition, full stop. It's in their name," Heidi Shierholz, president of the Economic Policy Institute, said Tuesday. "Noncompetes are bad for workers, bad for consumers, and bad for the broader economy. This rule is an important step in creating an economy that is not only strong but also works for working people."