New York
CNN
—
Lower than 24 hours after the Federal Commerce Fee issued a ultimate rule this week banning employers from using noncompete agreements in the USA, the US Chamber of Commerce and the Enterprise Roundtable filed a lawsuit in opposition to the company in federal courtroom within the Japanese District of Texas.
Another lawsuit was filed in federal courtroom within the Northern District of Texas by enterprise tax providers agency Ryan.
And extra could also be filed within the coming weeks. “We predict it’s probably extra lawsuits might be filed,” stated employment lawyer Daniel Turinsky, a associate at DLA Piper.
Even earlier than the rule was issued, the US Chamber had promised to sue on grounds that, in its view, the company exceeded its administrative authority by outlawing what it deems “unfair strategies of competitors.”
The swimsuit argues that with no clear legislative mandate from Congress, the FTC doesn’t have the ability to difficulty and implement its blanket noncompete ban.
“The FTC contends that by utilizing regulation they’ll merely declare widespread enterprise practices to be ‘unfair strategies of competitors’ and thus unlawful. That is even though noncompete agreements have been round longer than the 110-year-old FTC and till now nobody has advised that they’re unlawful,” the US Chamber stated in a launch saying the lawsuit. “If the FTC can regulate noncompete agreements, then they’ll determine to manage and even ban some other enterprise observe. All with no vote from Congress.”
The Chamber and the Enterprise Roundtable, together with a 3rd plaintiff — the Longview Chamber of Commerce in Longview, Texas — are asking the court to difficulty a keep to cease the rule from going into impact, a preliminary injunction that may prohibit the FTC from implementing the rule whereas the case is being litigated, “or each.”
In response to the US Chamber’s lawsuit, FTC Chair Lina Khan expressed confidence the company is on agency floor legally. Showing on CNN’s “The Lead With Jake Tapper” after the brand new noncompete prohibition was introduced, she stated the company has “clear authorized authority” to difficulty such a ban.
The FTC rule isn’t set to enter impact till 120 days from the day it’s revealed within the Federal Register. So probably not earlier than September.
However that efficient date might be postponed if the federal courts in Texas — or some other courts the place fits are filed — determine to grant a keep or preliminary injunction.
That leaves employers and workers in limbo with regards to current noncompete agreements, nearly all of which might change into unenforceable if and when the rule takes impact. (The one exception listed here are current noncompetes for senior executives — they may stay in power regardless.)
Within the close to time period, “I’m typically telling purchasers to take a wait-and-see strategy with respect to the FTC rule whereas courtroom challenges play out within the subsequent few weeks,” Turinsky stated.
If the rule is placed on ice till the circumstances are determined, after which appeals are filed, that would additional delay the rule’s efficient date by many extra months if it isn’t in the end struck down utterly.
“The rule is being challenged, and there’s a pretty important probability that the problem might be upheld by decrease courts,” stated James Witz, a shareholder at Littler, an employer-side legislation agency, and co-chair of the agency’s Unfair Competitors and Commerce Secrets and techniques Observe Group.
Translation: “It might take a while for the noncompetes to be invalidated,” Witz stated.
However employers nonetheless in search of to difficulty new noncompetes whereas the circumstances are litigated, could face resistance from some workers who are actually conscious of the FTC’s motion, he famous.