U.S. Chamber of Commerce threatens to sue the FTC over proposed ban on noncompete clauses

A major business advocacy group has pledged to sue the Federal Trade Commission if it acts on a proposal to ban noncompete clauses in worker contracts — an issue that has bipartisan support among lawmakers.

The U.S. Chamber of Commerce, which represents some 3 million businesses, is prepared to sue if the FTC continues to push for a proposal that prohibits companies from imposing noncompete clauses on employees, President and CEO Suzanne P. Clark told reporters Thursday. The organization is the largest U.S. business trade group and spent close to $60 million lobbying lawmakers during the first three quarters of last year, according to non-partisan campaign finance watchdog Open Secrets.

The Chamber called the proposal “blatantly unlawful” and ignorant of established state laws where “noncompete agreements are an important tool in fostering innovation and preserving competition.” The change would potentially increase wages by approximately $300 billion a year for workers, according to the FTC.

The organization has also vowed to lobby Congress to limit some of the FTC’s regulatory activities through the appropriations process, said Neil Bradley, executive vice president, chief policy officer and head of strategic advocacy for the U.S. Chamber.

Banning noncompete agreements is “clearly authority that (the FTC doesn’t) have and no one has ever thought that they had,” Bradley said. “Those are things that we can try to forge bipartisan agreement on to get appropriations writers to limit the authority.”

The agency’s premise — that it can eliminate noncompetes under Section 5 of the FTC Act, which bans unfair methods of competition — is something most legal observers don’t think is possible, Bradley said.

“This is why states have regulated it. And until Congress changes that, it’s really important if … you believe in the rule of law, that at a minimum, federal agencies abide by the law. And this is not abiding by the law no matter how you write it,” Bradley said.

Lifting noncompetes could also threaten business innovation, said Clark, by endangering “secret-keeping” among former employees who freely transition to another company.

The U.S. Chamber is no stranger to challenging federal agencies it feels have overreached their authority in court. It has filed a lawsuit against the FTC in the past year, as well as the Securities and Exchange Commission and the Consumer Financial Protection Bureau.

But its mission to counter the FTC’s power might face an uphill battle in the House where the chamber has fallen out of favor with Republican leadership, including new House Speaker Kevin McCarthy, R-Calif, after it backed so-called woke policies. This past summer, McCarthy said he would not even meet with the group if he won the speakership, according to Axios.

The proposal to ban noncompetes has also been taken up before in the Senate. A bill introduced by Sen. Chris Murphy, D-Conn., in 2021 to eliminate them under certain conditions attracted bipartisan support from Republican cosponsors, Sens. Todd Young of Indiana and Kevin Cramer of North Dakota.

At the time, Young said that lifting noncompete clauses would provide Americans the “utmost flexibility to find and secure employment” during the pandemic.

“Non-compete agreements stifle wage growth, career advancement, innovation, and business creation,” he said.

Bradley said working with Congress to limit the FTC’s authorities will be an “uphill challenge” with President Joe Biden in office and with Democrats in control of the Senate.

“We’re going to work all angles we’re not putting all of our eggs in the appropriations … basket,” he said. “We’re already in litigation, and we’re going to be in future litigation against the FTC.”