Small Businesses Challenge FTC Ban on Noncompete Agreements in Court

Published: Jun 10, 2024
by Michael Guta
In Small Business News

The National Federation of Independent Business (NFIB) has filed an amicus brief in the case ATS Tree Services, LLC v. Federal Trade Commission (FTC) at the U.S. District Court for the Eastern District of Pennsylvania. This case challenges the FTC’s final rule banning noncompete agreements, a regulation issued in April 2024 that has faced significant opposition from small business advocates.

Beth Milito, Executive Director of NFIB’s Small Business Legal Center, criticized the rule, stating, “This rule is as superfluous as it is detrimental for small businesses. The FTC significantly underreported the impact this regulation will have on small businesses nationwide while failing to provide any substantial reasoning for the necessity of this arbitrary mandate.”

The brief presented by NFIB and its coalition partners argues that the FTC’s rule is based on a flawed cost-benefit analysis and asserts that the FTC’s reasoning for the rule is both fallacious and inconsistent, making the rule arbitrary and capricious. This coalition includes the National Retail Federation, International Franchise Association, Associated Builders and Contractors, American Hotel & Lodging Association, National Association of Wholesale Distributors, Independent Electrical Contractors, Consumer Technology Association, Home Care Association, Restaurant Law Center, and U.S. Council for International Business.

The NFIB Small Business Legal Center is dedicated to protecting the rights of small business owners in the nation’s courts. Currently, NFIB is active in more than 40 cases in both federal and state courts across the country, including the U.S. Supreme Court. The outcome of this case could have widespread implications for small businesses and their ability to utilize noncompete agreements as a tool to protect their business interests. Many small businesses rely on noncompete agreements to safeguard proprietary information and maintain competitive advantages.

The FTC’s final rule has sparked a significant debate, with proponents arguing it will increase employee mobility and innovation, while opponents, like NFIB, believe it undermines small businesses’ ability to compete effectively. As this case progresses, it will be closely watched by business owners and legal experts alike.

Image: Depositphotos

Michael Guta is the Assistant Editor at Small Business Trends and has been with the team for 9 years. He currently manages its East African editorial team. Michael brings with him many years of content experience in the digital ecosystem covering a wide range of industries. He holds a B.S. in Information Communication Technology, with an emphasis in Technology Management.

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Michael Guta