Dive Brief:
- A Texas federal judge for the Eastern District of Texas on May 3 put a hold on the U.S. Chamber of Commerce’s lawsuit alleging the Federal Trade Commission’s ban on noncompete agreements between workers and employers is outside the scope of FTC’s authority.
- U.S. District Judge J. Campbell Barker ordered a stay in the lawsuit filed April 24 by the Chamber over a first-to-file rule, citing a lawsuit filed one day earlier in the Northern District of Texas by tax services firm Ryan, LLC, that “raise[s] identical legal theories.”
- The judge noted in the written order that the plaintiffs in the Chamber lawsuit, like those in the Ryan case, “similarly seek a judgment declaring their rights, an injunction against the FTC enforcing the rule against plaintiffs’ members, and an order vacating and setting aside the rule.” The order also mentions that Ryan is a member of a plaintiff in the Chamber case, the Texas Association of Business.
Dive Insight:
The FTC on April 23 voted 3-2 to issue a final rule that would ban nearly all noncompete agreements between employers and employees. That rule is set to take effect Sept. 4.
Under the rule, it will be a violation of federal antitrust laws for employers to sign new noncompete agreements with workers after the effective date. Existing noncompetes with workers, apart from those with senior executives, also will no longer be enforceable at that time, per the rule.
The Chamber in its lawsuit argues that the FTC doesn’t have the authority to issue rules like the noncompete ban and says the commission is overreaching in calling the clauses “an unfair method of competition.”
Since the FTC announced its plans to issue a rule on noncompetes, which it said suppress workers’ wages and stifle competition, the commission has been met with backlash from the business community that largely echoes the Chamber’s allegations.
