Businesses sue over FTC ban on noncompetes

[LAUREN TAYLOR]

ONCE CONSIDERED ESSENTIAL FOR SAFEGUARDING TRADE SECRETS AND EMPLOYEE TRAINING INVESTMENTS — NON-COMPETE CLAUSES FACE LEGAL SCRUTINY — CHALLENGING THEIR RELEVANCE IN TODAY’S EMPLOYMENT LANDSCAPE.

RYAN LLC — A GLOBAL TAX SERVICES PROVIDER — FILED A LAWSUIT IN THE NORTHERN DISTRICT OF TEXAS —

AGAINST A NEW FEDERAL TRADE COMMISSION RULE THAT PROHIBITS NON-COMPETE AGREEMENTS NATIONWIDE.

THE FIRM ARGUES THAT THE RULE OVERSTEPS THE F-T-C’S REGULATORY AUTHORITY —

AND THREATENS BUSINESSES’ ABILITY TO PROTECT THEIR INTELLECTUAL PROPERTY AND RETAIN TOP TALENT.

THE LAWSUIT READS:

“The new rule…imposes an extraordinary burden on businesses seeking to protect their intellectual property and retain top talent within the professional services industries.”

IT CONTENDS THAT ELIMINATING NON-COMPETES 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 DOLLARS ANNUALLY.

THEY SAY NEARLY ONE IN FIVE AMERICAN WORKERS HAVE SIGNED NON-COMPETE CLAUSES.

THE FTC CHAIR SAYS NON-COMPETES ARE EXPLOITATIVE AND AN “UNFAIR METHOD OF COMPETITION” AND VIOLATE THE FEDERAL TRADE COMMISSION ACT.

SHE ADDS:

“The freedom to change jobs is core to economic liberty and to a competitive, thriving economy. 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 IT UNLAWFULLY CHANGES EMPLOYMENT CONTRACT NORMS, USUALLY MANAGED BY STATE LAW, AND COULD STIFLE ECONOMIC INNOVATION BY DETERRING NEW INVESTMENTS.