Non-compete ban puts US businesses in limbo as legal battle rages on

Sign up for the Editor’s Digest of the Financial Times curated by Roula Khalaf, Editor of the FT, for free.

The US Chamber of Commerce and other trade groups have filed a lawsuit against the US Federal Trade Commission after it banned non-compete agreements. The coalition, which includes the Business Roundtable, Texas Association of Business, and Longview Chamber of Commerce, argues that this ban will harm their ability to protect confidential information and investments in their workforce. They are seeking to have the rule overturned and prevent the FTC from enforcing it.

The FTC voted 3-2 to approve the rule that bans most non-compete contracts that restrict workers from leaving for a competitor for a set period and in a specific geographic region. The regulator claims that its legal authority is clear and that addressing non-competes falls within its mandate. This legal battle between business groups and regulators is likely to continue for months, leaving employers uncertain about the future of non-compete agreements.

The Chamber of Commerce has been vocal in opposition to the FTC’s move to ban non-compete agreements, arguing that they are governed by well-established state laws rather than federal regulation. The FTC estimates that around 30 million workers in the US are currently bound by non-compete contracts, impacting not only high-level executives but also hourly employees such as bartenders and security guards. The outcome of this legal battle will have significant implications for American workforce policies.