Lawsuits Look to Right-Wing Judges to Overturn Final Rule Which Frees Millions from Coercive Contracts like Training Repayment Agreement Provisions (TRAPs) and is Expected to Generate More Than $400 Billion In Increased Wages
April 24, 2024 | WASHINGTON, D.C. — Today, the U.S. Chamber of Commerce (Chamber) filed a lawsuit in the Eastern District of Texas seeking to block the Biden Administration’s historic effort to ban the use of non-compete agreements and Training Repayment Agreement Provisions (TRAPs) that function as such. This lawsuit joins a wave of litigation filed by the Chamber and other business interests in federal courts in the conservative 5th Judicial Circuit aimed at blocking key efforts by the Biden Administration to protect workers, students, and consumers.
The Federal Trade Commission’s (FTC) rule will empower the roughly one-in-five Americans currently restrained by non-compete agreements to seek better wages and working conditions with other employers, and end the practice of departing workers having to repay their employers thousands of dollars for on-the-job training. It is expected to promote the creation of more than 8,500 new businesses each year and generate over $400 billion in increased wages for workers over the next decade. The FTC’s rule applies to all workers, regardless of income or industry.
“Today, the U.S. Chamber of Commerce has once again made it clear it stands on the side of multinational conglomerates and billion-dollar companies at the expense of protecting working Americans,” said Persis Yu, Deputy Executive Director & Managing Counsel of Student Borrower Protection Center. “With this new rule, the Biden Administration and FTC have taken real steps to end employers’ use of predatory training debt and ensure an economy where working Americans can thrive and earn a decent living. We hope that the courts side with the clear text of the law and refuse to entertain this corrupt ploy.”
“On Tuesday, the FTC exercised its legal rulemaking authority to make life better for working people in a move overwhelmingly supported by the American people,” said Molly Coleman, Executive Director of People’s Parity Project. “Having lost the fight to persuade either the American people or the FTC of the righteousness of their position, it’s alarming that the Chamber is turning to the courts to force their preferred policy outcome on the people. In a democracy, the courts aren’t supposed to be the ultimate policymakers—but the Chamber knows that this federal judiciary can’t wait to block policies that value people over corporate profits. It’s imperative for the proper functioning of our democracy that the judiciary allow the ban on non-competes to stand.”
“For too long, non-compete requirements imposed by employers have restricted the mobility and aspirations of countless workers. The FTC’s critical action in banning most non-compete agreements is a victory for working people and will help ensure increased worker mobility, unlock innovation, and will lead to better wages and working conditions,” said Robin Thurston, Legal Director of Democracy Forward. “Special interests were lined up to challenge this policy before even seeing the final version and Democracy Forward is committed to using all the tools our democracy provides to work alongside the broad coalition of workers, small businesses, advocates, and experts to defend this important new rule.”
The Chamber’s lawsuit argues that the FTC lacks the ability to promulgate rules related to proscribing “unfair methods of competition,” despite the FTC Act Section 6(g) stating that “[t]he Commission shall also have power … to make rules and regulations for the purpose of carrying out the provisions of this subchapter.” The text is crystal clear and unambiguous: the FTC can write rules regarding competition. What the agency is seeking to do through rulemaking is not simply lawful, but it is the mandate that Congress gave it. In the supplementary information about the final rule, the FTC also highlights that the D.C. Circuit expressly upheld the FTC’s power under section 6(g) to make rules regulating both unfair methods of competition and unfair or deceptive acts or practices in National Petroleum Refiners Association v. FTC, 482 F.2d 672 (D.C. Cir. 1973).In addition to the Chamber’s lawsuit joined by the Business Roundtable, the Texas Association of Business, and the Longview Chamber of Commerce, global tax services and software provider Ryan also filed a lawsuit in the Northern District of Texas challenging the FTC’s new non-compete rule. The firm’s lawsuit similarly argues that the FTC lacks the authority to write competition rules.
Background
On April 23, 2024, the FTC issued a final rule promoting competition and protecting the fundamental freedom of workers to change jobs by banning non-compete agreements nationwide. The FTC announced its notice of promised rulemaking in January 2023 and received more than 26,000 comments on the proposed rule, with over 25,000 comments in support of the FTC’s proposed ban on non-competes. The FTC carefully reviewed each comment over the next year, and incorporated numerous changes to the proposed rule in response to public feedback.
The FTC initiated this rulemaking process following the Open Markets Institute’s submission of a petition for rulemaking in March 2019. The petition was signed by more than 60 labor unions and public interest groups, including Public Citizen, the AFL-CIO, and SEIU.
Further Reading
Read the FTC’s rule on non-compete agreements: Non-Compete Summary and Rule
Background on the FTC’s non-compete rule here: Fact Sheet on the FTC’s Non-compete Rule and Estimated Increases in Total Annual and Average Worker Earnings by State
Additional background on TRAPs: Background on Training Repayment Agreement Provisions
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About Student Borrower Protection Center
Student Borrower Protection Center (SBPC) is a nonprofit organization focused on eliminating the burden of student debt for millions of Americans. We engage in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance racial and economic justice.
Learn more at protectborrowers.org or follow SBPC on Twitter @theSBPC.
About People’s Parity Project
People’s Parity Project is a movement of attorneys and law students organizing for a democratized legal system which values people over profits, builds the power of working people, and opposes subordination of any form. Together, we are dismantling a profession that upholds corporate power and building a legal system that is a force for justice and equity. Our work focuses on building power for working people in the civil legal system through organizing, policy innovation, political education, and solidarity.
Learn more at peoplesparity.org or follow People’s Parity Project on Twitter @peoplesparity.
About Democracy Forward
Democracy Forward Foundation (Democracy Forward) is a nonprofit legal organization founded in 2017 that litigates cases involving government action on behalf of organizations, individuals, and municipalities. The organization has taken 650 legal actions and achieved victories supporting democracy and improving the lives and wellbeing of people and communities. Democracy Forward Foundation is a 501(c)(3) non-profit organization.
Learn more at democracyforward.org or follow Democracy Forward on Twitter @DemocracyFwd.