PHILADELPHIA (Legal Newsline) - The company challenging the Biden Administration's new rule banning noncompete clauses in employment contracts is asking a federal judge to stay its implementation and issue a preliminary injunction.
ATS Tree Services filed its motion May 14 in Philadelphia federal court against the Federal Trade Commission. ATS is represented by the Pacific Legal Foundation, which claims the FTC has exceeded its authority.
Congress created the FTC to ensure fair competition by allowing it to pursue individualized adjudications, the motion says. But a 3-2 vote to ban noncompete agreements is another thing, ATS says.
"The FTC now arrogates Congress' power to make law because it has finalized a rule that ignores express limitations on its authority," the motion says.
"It now claims power to write its own law disrupting the employment relationships of one in five American workers. Irrespective of its goals, the FTC must operate exclusively within the authority granted to it by Congress."
The FTC claims banning noncompetes will generate more than 8,500 new businesses each year and raise wages, but critics disagree.
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.
Judging ATS's argument will be Kelley B. Hodge, who took the bench in December 2022 after appointment by President Joe Biden. Among her previous jobs was a spot at Fox Rothschild's labor and employment department.
Hodge sided with state officials this year when a lending company challenged whether they could use federal law to pursue allegations of illegal add-on products to personal loans.
Hodge said the states could use the federal Consumer Financial Protection Act to sue Mariner Finance, even though no federal agency has alleged any wrongdoing. Hodge's ruling could allow a single attorney general to use federal law to make a business change its practices nationwide.
A 3-2 vote by FTC commissioners approved the noncompete 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 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.