On April 24, the day after the FTC announced its ruling, the U.S. Chamber of Commerce filed a lawsuit against the agency’s near-total ban on noncompete agreements, Sewell explains. The Chamber of Commerce contends that the FTC lacks the authority to implement such a comprehensive ban. They argue that while the FTC can enforce antitrust laws enacted by Congress, it does not have the right to establish rules defining other company practices as anticompetitive without explicit congressional authorization.

“Companies should consider making preparations for potential  implementation of the new rule but also monitor its status should legal action result in delay or cancellation,” Sewell advises. “Many observers believe it will be struck down in federal court, and if this occurs after the rule becomes effective, then applicable policy would revert to state law. The Security Industry Association (SIA) will continue to track developments and provide related analysis for SIA members.”

The Chamber of Commerce said the decision sets a dangerous precedent for government micromanagement of business and can harm employers, workers and the U.S. economy.

“The Federal Trade Commission’s decision to ban employer noncompete agreements across the economy is not only unlawful but also a blatant power grab that will undermine American businesses’ ability to remain competitive,” said U.S. Chamber of Commerce President and CEO Suzanne P. Clark.

A major concern is that companies, including small businesses, may incur substantial legal costs as they are forced to find alternative ways to protect their investments, Sewell points out. Small businesses, in particular, could suffer under this rule, as they will be unable to prevent larger companies from hiring their top employees, potentially risking the exposure of confidential information.