Federal Trade Commission Bans Employer Noncompete Agreements, U.S. Chamber of Commerce Announces Lawsuit

Following a vote by the Federal Trade Commission (FTC) in favor of banning all employer noncompete agreements nationwide on April 23, 2024, the U.S. Chamber of Commerce announced the organization will file suit against the FTC.

A noncompete agreement, where one party promises not to engage in conduct that would increase competition for the other party for a specific period of time, can be used to protect intellectual property, business investments, and trade secrets, among other areas of a business.

The ban is set to take effect 120 days after the ruling, requiring employers to not begin new noncompete agreements, ensure all current and past employees know the agreements will not be enforced, and end existing agreements with most employees.

When announcing the suit, the U.S. Chamber said the ruling reaches beyond the scope of the FTC’s authority, and the agency cannot declare simple business practices to be “unfair methods of competition” and thus illegal.

“Since its inception over 100 years ago, the FTC has never been granted the constitutional and statutory authority to write its own competition rules. Noncompete agreements are either upheld or dismissed under well-established state laws governing their use,” said U.S. Chamber President and CEO Suzanne P. Clark. “Yet, three unelected commissioners have unilaterally decided they have the authority to declare what’s a legitimate business decision and what’s not by moving to ban noncompete agreements in all sectors of the economy.”

Kentucky Chamber President and CEO Ashli Watts released the following statement on the issue:  

“Any time there is a new mandate or prohibition on employers, it is a huge concern to the Kentucky Chamber. This decision takes away the rights of a business to manage its own workforce decisions and protect its valuable information and resources. A one-size-fits-all policy is bad for the economy. We stand with the U.S. Chamber in this fight.”

Business Roundtable, Texas Association of Business, and Longview Chamber of Commerce were named co-plaintiffs in the filing. Read the plaintiff’s complaint here.

To read the full ruling by the FTC, click here.