Federal Trade Commission sued over its ban on noncompete agreements

The U.S. Chamber of Commerce and the Business Roundtable today filed suit against the Federal Trade Commission in a Texas federal court. They want the court to throw out the Federal Trade Commission’s (FTC) ban on noncomplete agreements. The FTC yesterday, on a 3 to 2 vote, banned such restrictions in employment agreements. Noncompete clauses in contracts, preventing workers who leave or are fired from working for a competitor, are said to affect some 30 million employees in the U.S.

“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” said FTC Chair Lina M. Khan. “The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”

All workers, including senior executives, will no longer be subject to the agreements going forward when the rules go into effect 120 days after they are eventually entered into the Federal register.

However, senior executives will still be subject to any existing agreements going forward but all other instances will be considered non-enforcable. Senior executives are those earning more than $151,164 and in a policy making role according to the FTC’s proposed rules.

Although the change is already subject to legal challenges by multiple groups and companies, the FTC anticipates that if implemented the change will reduce healthcare costs by at least $74 billion, see the creation of new businesses increase by 3 percent annually, and sharply increase the number of patents filed.

They also estimate that the average worker will see their pay rise by an extra $524 per yar, with over $400 billion in increased wages for workers in the next decade.