Group sues over worker noncompete agreements

The U.S. Chamber of Commerce, the country’s largest business lobby, filed a lawsuit on Wednesday seeking to strike down a federal agency’s near-total ban on employers requiring workers to sign agreements not to join rivals or launch competing businesses.

The Chamber’s lawsuit in federal court in Tyler, Texas, alleges that the Federal Trade Commission lacks the power to adopt sweeping rules such as the ban on so-called noncompete agreements released on Tuesday, which is set to take effect in August.

The FTC is empowered by federal law to enforce existing antitrust laws passed by Congress, but not to enact rules determining what other type of conduct by businesses is anticompetitive, the Chamber said in the lawsuit.

“Companies will face substantial legal costs as they are forced to resort to other tools to attempt to protect their investments,” the Chamber said.

“And the economy as a whole will suffer as start-ups and small businesses are unable to prevent dominant firms from hiring their best employees and gaining access to their confidential information.”

The lawsuit comes after tax service firm Ryan LLC on Tuesday filed the first legal challenge to the FTC rule in a different federal court in Texas.

The commission, Democrats and worker advocates who support the rule say it is necessary to rein in the increasingly common practice of requiring workers to sign noncompete agreements, even in lower-paying service industries such as fast food and retail.