FTC to Issue Non-Compete Ban as Chamber Lawsuit Looms

The US Federal Trade Commission logo.

(Bloomberg) — The US Federal Trade Commission is poised to vote Tuesday to adopt a near-total ban on non-compete provisions that prohibit workers from switching jobs within an industry, a rule the Chamber of Commerce vowed to immediately challenge in court.

The high-stakes legal showdown comes three years after President Joseph Biden signed an executive order encouraging the FTC to limit non-compete agreements, which affect roughly one in five Americans.

The antitrust and consumer protection agency is expected to publicly release the text of its final rule Tuesday afternoon before debating and voting on it in an open meeting of the FTC’s five commissioners. The Chamber of Commerce, the nation’s largest business lobby, told reporters it plans to sue over the rule as soon as Wednesday.

The FTC first proposed a non-compete ban in January 2023, arguing the restrictions unfairly block workers from switching jobs and undermine labor competition. The proposal has the backing of labor organizations AFL-CIO and the Service Employees International Union, Democratic senators and attorneys general from California, Illinois and 17 other states.

But business groups oppose the ban, arguing that it’s overly broad and limits the ability of companies to protect confidential information.

The final rule is largely the same as the proposal released last year, according to a person familiar with the draft, and would bar the use of non-competes in most cases. Tuesday’s vote is expected to fall along partisan lines with the FTC’s three Democrats in favor and the agency’s Republicans opposed. The meeting marks the first occasion that the FTC’s five members have met publicly since Republicans Melissa Holyoak and Andrew Ferguson joined the agency following their confirmation last month.

In a call with reporters Monday, the Chamber’s Chief Policy Officer Neil Bradley said the FTC doesn’t have the authority to issue the rule.

The rule “opens up a Pandora’s box where this commission or future commissions could be literally micromanaging every aspect of the economy,” Bradley said. “Agencies can’t exercise authority that Congress hasn’t given them. Congress has not given the FTC the ability to write regulations with respect to competition.”

Chair Lina Khan and the agency’s Democrats, however, maintain that the FTC does have authority to issue rules defining unfair methods of competition.

The last time the FTC issued a rule defining an unfair method of competition was in 1968, known as the Men and Boy’s Tailored Clothing Rule. The rule, repealed in 1994, required clothing companies to provide equal treatment in promotions to all sellers.

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