The US Chamber of Commerce is threatening to sue the FTC over the proposed ban on non-compete clauses

A signage is seen at the Chamber of Commerce building in the borough of Manhattan in New York City, New York, the United States, April 21, 2021.

Andrew Kelly | Reuters

A major business group has pledged to sue the Federal Trade Commission if it responds to a proposal to ban non-compete clauses in employment contracts — an issue lawmakers have bipartisan support for.

The U.S. Chamber of Commerce, which represents about 3 million companies, stands ready to sue if the FTC continues to push for a proposal that would ban companies from imposing non-compete clauses on workers, President and CEO Suzanne P. Clark told reporters Thursday. The organization is the largest US corporate trading group and spent nearly $60 million lobbying lawmakers in the first three quarters of last year, according to nonpartisan campaign finance watchdog Open Secrets.

The board called the proposal “manifestly unlawful” and ignored applicable state law, where “non-compete agreements are an important tool to foster innovation and safeguard competition.” According to the FTC, the change would increase workers’ wages by about $300 billion a year.

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

The non-compete ban is “clearly an authority that (the FTC doesn’t have) and no one ever thought they had,” Bradley said. “These are things we can try to reach a bipartisan agreement on to get the authors of the funds to limit authority.”

The agency’s premise — that it can eliminate non-competition clauses under Section 5 of the FTC Act, which prohibits unfair practices in competition — is something most legal observers don’t think is possible, Bradley said.

“That’s why the states regulated it. And until Congress changes that, it’s really important if… you believe in the rule of law that at least federal agencies obey the law. And that’s not legal no matter how you spell it,” Bradley said.

Lifting non-compete obligations could also jeopardize business innovation, Clark said, by jeopardizing the “disclosure” of former employees who voluntarily transfer to another company.

The US Chamber is no stranger to challenging federal agencies that it believes have exceeded their authority in court. She filed a lawsuit against the FTC as well as the Securities and Exchange Commission and the Consumer Financial Protection Bureau last year.

But their mission to counter the FTC’s power could face an uphill battle in the House, where the chamber has fallen out of favor with Republican leaders, including new House Speaker Kevin McCarthy, R-Calif, after they won the had supported the so-called guard policy. Last summer, McCarthy said he wouldn’t even meet with the group if he won speakership, according to Axios.

The proposal to ban non-competition clauses has also already been discussed in the Senate. A 2021 bill introduced by Sen. Chris Murphy, D-Conn., to eliminate her under certain conditions received bipartisan support from fellow Republican sponsors, Sens. Todd Young of Indiana and Kevin Cramer of North Dakota.

At the time, Young said removing non-compete clauses would give Americans “the utmost flexibility in finding and securing jobs” during the pandemic.

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

Bradley said working with Congress to limit the FTC’s powers will be a “tough challenge” when President Joe Biden is in office and Democrats are in control of the Senate.

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

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