“Just as our forebearers toward the end of the 19th century began to recognize that uncontrolled economic individualism had led to private restraints that tolerated neither individualism nor freedom, amicus similarly recognizes that noncompete agreements are often coercive private restraints masquerading as freedom of contract,” the brief said.
The FTC voted 3-2 along party lines to implement the new rule on April 23, deeming the use of noncompete clauses in employment contracts an unfair method of competition and thus unenforceable. Set to take effect in September, the rule bars noncompetes moving forward and requires employers to tell current and former employees that existing agreements are no longer enforceable.
It includes a carveout for existing noncompetes covering senior executives, but the use of the clauses for those employees will be banned going forward.
The suit from Ryan and the Chamber argues the FTC lacks express congressional approval to regulate noncompetes and cannot rely on its general authority against unfair methods of competition. The suit also argues that the retroactive effect raises constitutional concerns and that a categorical ban reflects an “arbitrary and capricious” exercise of the agency’s powers since noncompetes need to be analyzed individually to see if they’re unfair.
