Noncompete lawsuit overview:
- Who: The Chamber of Commerce of the United States and three other groups filed a lawsuit against the Federal Trade Commission (FTC) and Chair Lina Khan.
- Why: The Chamber of Commerce is attempting to overturn the FTC’s noncompete agreement ban, stating they are reasonable and necessary to protect company investments in staff.
- Where: The FTC lawsuit was filed in federal court in Tyler, Texas.
The Chamber of Commerce of the United States and three other groups filed a lawsuit against the Federal Trade Commission (FTC) and Chair Lina Khan attempting to overturn the FTC’s noncompete agreement ban.
The Chamber of Commerce claims the strength of companies is their employee base, and thus companies spend large sums of money and resources to train employees. This, the chamber argues, makes noncompete clauses a reasonable and necessary tool for companies to protect their investments.
“Having invested in their people and entrusted them with valuable company secrets, businesses have strong interests in preventing others from free-riding on those investments or gaining improper access to competitive, confidential information,” the Chamber of Commerce lawsuit says. “For centuries, businesses throughout the United States have relied on reasonable noncompete agreements to protect those critical interests.”
Noncompete clauses benefit both employer and employees, Chamber of Commerce lawsuit claims
The FTC first proposed the noncompete agreement ban in January 2023.
The Chamber of Commerce is joined in its lawsuit by fellow plaintiffs the Business Roundtable, Texas Association of Business and Longview Chamber of Commerce.
The plaintiffs claim noncompete agreements benefit both employers and workers because it protects employers’ sensitive information and workers get “increased training, access to more information, and an opportunity to bargain for higher pay,” the FTC lawsuit says.
Noncompete agreements have their own series of guidelines in each state to judge when the agreements are appropriate and when they go too far, the Chamber of Commerce lawsuit says.
The lawsuit argues that the federal government has never previously been directly involved in noncompete agreements and that Congress has never voted on the topic.
Have you ever been asked to sign a noncompete clause? Let us know in the comments.
The plaintiff is represented by Scott J. Ferrell of Pacific Trial Attorneys APC.
The noncompete clause lawsuit is Chamber of Commerce of the United States of America, et al. v. Federal Trade Commission, et al., Case No. 6:24-cv-00148-JCB, in the U.S. District Court for the Eastern District of Texas Tyler Division.
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