Another Illegal Power Grab From the FTC
More than 30 million Americans have signed employment contracts that limit their ability to switch jobs to a competing company, and those contracts are regulated by laws in 47 states.
The Federal Trade Commission (FTC) swept all of that aside in one fell swoop this week, as the commission voted down party lines to ban future noncompete agreements and to block the enforcement of many of those existing contracts. (The retroactive ban on noncompete agreements does not apply to senior-level employees.) Even for an agency that has sought in recent years to stretch its regulatory reach, the new FTC rule banning noncompete agreements is a stunning expansion of federal power—one that courts almost certainly will be asked to rein in.
Banning noncompete agreements is “not only unlawful but also a blatant power grab,” said Suzanne P. Clark, president and CEO of the U.S. Chamber of Commerce, in a statement. “This decision sets a dangerous precedent for government micromanagement of business and can harm employers, workers, and our economy.”
The chamber is already preparing to sue the FTC over the new rules, Clark said. That lawsuit could be filed as soon as Wednesday, according to The Wall Street Journal.
FTC Commissioner Lina Khan says the new rule “will ensure that Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”
But the commission’s legal authority to issue such a rule seems extremely tenuous. The FTC claims that section Sections 5 and 6(g) of the Federal Trade Commission Act grant it the authority to regulate “unfair methods of competition,” which may include things like noncompete agreements.
Traditionally, the FTC has operated more like a law enforcement agency—that is, going after firms and industries that engage in anti-competitive behavior like price fixing or that hold monopolies. In issuing this rule, the commission is trying to switch gears towards being a regulatory agency that can promulgate sweeping rules applying to the whole economy. In doing so, Khan
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