PHILADELPHIA (Legal Newsline) - A Pennsylvania tree service company with a history of using noncompete agreements for its employees is suing the Federal Trade Commission over its new rule banning them.
The FTC claims banning noncompetes will generate more than 8,500 new businesses each year and raise wages, but critics disagree. On April 24, the U.S. Chamber of Commerce and three other groups sued in Texas federal court to block the rule.
The next day, in Philadelphia federal court, ATS Tree Services and counsel at Pacific Legal Foundation filed suit, claiming the FTC has exceeded its authority.
"Although Congress has declined to outlaw noncompete agreements, the FTC now asserts a roving power to prohibit by legislative rule any business arrangement that any three Commissioners deem 'unfair,' even where such arrangements are legal under state law," the suit says.
Noncompetes have helped ATS provide training and access to proprietary information because the company hasn't had to worry about employees leaving for new jobs and taking that information to competitors, ATS says.
"The FTC's noncompete agreement ban is unlawful, senseless, and itself unfair," the suit says. "It treats employees as though they are not competent to understand their own interests and powerless to control their own destinies."
A 3-2 vote by FTC commissioners approved the new rule and was lauded by FTC chair Lina Khan, who has been a target of criticism over her activist approach to the role.
She sued Amazon under under antitrust laws for keeping prices low for its customers. Amazon requires merchants on its platform to charge prices equal to or lower what they charge elsewhere. She then admitted she buys diapers on Amazon.
In her career-making 2017 academic article attacking Amazon’s practices, she acknowledged it would be necessary to “revise antitrust law” to go after Amazon. She's also sued Amazon for allegedly tricking shoppers into enrolling in its Prime program, with the company claiming she is distorting federal law without warning.
She's filed an antitrust lawsuit against Facebook owner Meta, which argues Khan can't actually show what market it has allegedly monopolized. And MGM Resorts says she is abusing her authority with a probe into a cyberattack, given that she will not recuse herself from it even though she is a potential civil plaintiff and witness.
The practice of rulemaking by President Joe Biden's agency chiefs has increasingly irritated groups nationwide. It - if the rules are allowed to stand - allows his administration to implement new policies that Democrats in Congress couldn't gain support for.
The U.S. Chamber has sued the Consumer Financial Protection Bureau over a rule limiting late fees on credit card payments to $8, and a House committee has voted to repeal it, though support from the Democrat-led Senate is unlikely.
House Financial Services Committee chair Andy Barr claims the CFPB has gone "rogue," and a trade group for lenders warns that new rules targeting "risky" loans does not include a description of what those would be.
And Biden's Labor Department, which is headed by a woman whose appointment to secretary was never confirmed by the Senate, has changed the rules for overtime pay and whether independent contractors are actually company employees entitled to benefits.
As for the noncompete rule from the FTC, ATS Tree Services claims it will hurt it and other small businesses who need to train their workers without fear it will come back to bite them.
"It treats employers as behaving coercively and exploitatively, rather than negotiating with their employees in good faith," the lawsuit says.
"It usurps the authority of states to establish their own laws concerning contracts. And it ignores that only Congress can make the law under our constitutional system."