U.S. Chamber of Commerce, business groups sue FTC over ban on noncompete clauses

• The U.S. Chamber of Commerce and several other business groups sued the Federal Trade Commission over its ban of noncompete clauses.
• The FTC voted Tuesday to ban noncompete agreements, which prohibit employees from going to work for competitors.
• The Chamber alleges that a universal ban is too wide reaching and that the FTC is overstepping its legal authority, which the Commission denied.

The U.S. Chamber of Commerce and several other business groups on Wednesday sued the Federal Trade Commission in Texas federal court over the commission's vote to ban noncompete clauses, which are used to block employees from leaving to work for competitors in the same industry.

On Tuesday, the FTC voted to enact the ban on the basis that noncompete clauses stifle the efficiency of the labor market, hinder competition and can lead to higher prices for consumers. Noncompete agreements often prevent workers from pursuing other jobs in their industry, and the better pay those jobs would offer.

The ban is set to take effect 120 days after the rule is officially published in the Federal Register.

In the meantime, the business groups are seeking to block the ban, claiming the FTC does not have the authority to implement the rule, and the rule itself is too wide in scope.

"The sheer economic and political significance of a nationwide noncompete ban demonstrates that this is a question for Congress to decide, rather than an agency," the U.S. Chamber, which represents roughly 3 million companies, wrote in the lawsuit filed in the Eastern District of Texas.

The business groups claimed that the FTC's ban, "breaks with centuries of state and federal law." In addition to the Chamber of Commerce, the Business Roundtable, Texas Association of Business