US ban on worker noncompetes faces uphill legal battle

The U.S.Federal Trade Commission’s ban on “noncompete” agreements commonly signed by workers is likely vulnerable to legal challenges, experts said, as some courts have grown increasingly skeptical of federal agencies’ power to adopt broad rules.The commission in unveiling the rule on Tuesday said agreements not to join employers’ competitors or launch rival businesses suppress workers’ wages and stunt their mobility and job opportunities.

About 30 million people, or 20% of U.S.workers, have signed noncompetes, the agency said.Business groups led by the U.S.

Chamber of Commerce, tax services firm Ryan LLC, and a Pennsylvania tree trimming company have already filed three lawsuits claiming that the FTC, which enforces antitrust laws, lacks the power to determine which business practices amount to unfair competition and should be banned.The Chamber late Wednesday moved to block the rule from taking effect pending the outcome of its lawsuit.Those challenges are likely to delay implementation of the rule, which is set to take effect in August.In the end they may doom the measure, as the FTC has staked out a novel and unprecedented position regarding its rulemaking powers, several lawyers and other experts said.The FTC rule may also be invalid because it addresses a “major question” with broad implications for the U.S.

economy, which the U.S.Supreme Court has said agencies can only undertake with explicit authorization from Congress, lawyers said.The FTC lacks that authority, and Congress itself has declined to pass proposed bans on noncompetes, said Jeremy Merkelson, a partner at law firm Davis Wright Tremaine in Washington, D.C.

who represents employers.“I think the Supreme Court has all it needs to rule that the FTC’s big swing was not greenlit by the legislative branch,” Merkelson said.Subscribe to our daily Business Report newsletter! Please provide a valid email address.

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