It didn’t take long for the U.S. Chamber of Commerce to try to block a sweeping regulation that prohibits the use of employment clauses that prevent workers from leaving and taking jobs with competing firms.
The large business trade association filed a lawsuit on Wednesday – the day after the Federal Trade Commission approved a final rule that would eliminate the use of non-compete agreements for almost every U.S. employee.
But the financial industry should not be lulled to sleep by the Chamber’s and other legal challenges that are certain to emerge, said Matt Prewitt, a partner at ArentFox Schiff. They need to start preparing for the profound changes in business practices that the rule will usher in.
“They may take their eye off the ball and think ‘problem solved’” by the legal action to scuttle the regulation, Prewitt said. “That’s probably the worst thing they can do in this climate.”
Prewitt points to the split FTC vote, 3-2, on the 570-page final rule. The three Democratic commissioners were in favor, saying it’s needed to protect workers and promote competition. The Republican commissioners asserted the FTC exceeded its authority in issuing the rule.
But there was no praise for non-competes at the FTC open meeting on Tuesday.
“Nobody gave a full-throated, aggressive defense of non-compete agreements,” Prewitt said. “Employers need to recognize the FTC’s action, even though it may exceed constitutional authority, is part of a broader trend against the enforcement of non-compete agreements.”
The FTC said approximately 30 million U.S. workers are subject to non-compete agreements. The final rule would:
The FTC said non-compete reform would result in an annual $524 increase in earnings for the average worker and spur
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