Ryan LLC, a global tax services provider, filed a lawsuit against a new Federal Trade Commission (FTC) rule that prohibits noncompete agreements nationwide. The firm argues the rule oversteps the FTC’s regulatory authority. Ryan LLC alleged the rule threatens businesses’ ability to protect their intellectual property and retain top talent.
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The lawsuit contends that eliminating noncompetes will allow employees to transfer sensitive information to competitors more easily. The U.S. Chamber of Commerce and other business groups have filed similar lawsuits.
The FTC touts the rule as boosting job mobility and potentially increasing national earnings by nearly $300 billion annually. Nearly one in five American workers have signed noncompete clauses, according to the FTC.
FTC Chair Lina Khan said noncompetes are exploitative and an “unfair method of competition” that violate the Federal Trade Commission Act.
“The freedom to change jobs is core to economic liberty and to a competitive, thriving economy,” Khan said. “Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand.”
However, the lawsuits claim the rule unlawfully changes employment contract norms, which are usually managed by state law. The lawsuits also said the rule could stifle economic innovation by deterring new investments.
