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Posted: 2024-04-25T17:53:04Z | Updated: 2024-04-25T17:53:04Z

Business groups that represent employers are not pleased with the Federal Trade Commissions new ban on noncompete agreements and have already gone to court seeking to block it.

The U.S. Chamber of Commerce, joined by the Business Roundtable and the Texas Association of Business, filed a lawsuit Wednesday in federal court in Texas arguing that the FTC has overstepped its legal authority in issuing the rule . The commission, which enforces antitrust law, finalized the historic new regulation in a 3-2 vote the previous day.

Noncompete agreements forbid workers from taking jobs at competing businesses for a certain period of time, effectively locking workers into their current positions. Its only logical for business groups to be upset with the FTC; banning noncompetes would shift more bargaining power to workers, forcing employers to improve wages and working conditions or risk losing talent to their competitors.

The FTC said that the rule would go into effect 120 days after it appears in the Federal Register. The Chamber could ask a judge to grant an injunction to stop the noncompete rule from taking effect while the case is being litigated.

Its only logical for business groups to be upset with the FTC; banning noncompetes would shift more bargaining power to workers.

Conservative groups often choose to mount their challenges to progressive federal policies in Texas, where theyre more likely to find a judge who shares their dislike for the regulatory state a legal practice called forum shopping. The Chamber filed its lawsuit in Texas Eastern District, which falls under the U.S. Court of Appeals for the 5th Circuit, considered the most right-wing of the federal circuits and a place where regulations go to die .

Many legal observers expect the case to eventually reach the U.S. Supreme Court, where a 6-3 conservative majority tends to side with businesses in contentious decisions.

The FTC has insisted that its on solid footing in issuing the rule. Lina Khan, the commissions chair, said in a CNN interview Wednesday that we have clear legal authority to ban the agreements.

Academics, politicians and policymakers, including President Joe Biden, have assailed noncompete agreements for years because of the way they force workers to stay in crummy, low-paying jobs rather than switching to something better. The FTC says they also stifle innovation by preventing people from starting their own businesses.

The commissions rule would render existing noncompetes unenforceable (with the exception of those applied to senior executives, who are less likely to be coerced into signing them) and bar employers from entering into new ones.

When the ban was first proposed last year, it proved popular among Americans. Polling from Ipsos at the time showed that 3 in 5 respondents supported such a regulation, including 66% of those who were employed.