By Daniel Wiessner
(Reuters) -President Donald Trump’s administration abandoned on Friday the U.S. government’s legal defense of a rule adopted under former President Joe Biden that had banned agreements commonly signed by workers not to join rivals of their employers or launch competing businesses.
The U.S. Justice Department filed motions in federal appeals courts in New Orleans and Atlanta to dismiss separate appeals of rulings by two judges that struck down the 2024 U.S. Federal Trade Commission rule concerning “noncompete” agreements. Republicans and business groups have criticized the rule.
The move was expected after FTC Chairman Andrew Ferguson, who was appointed to the post by Trump and had previously criticized the rule, said in February that the agency was reviewing it. The appeals involve legal challenges to the rule by a marketing firm and a real estate developer, as well as the U.S. Chamber of Commerce and other business groups.
Dropping the appeals means the courts will not have a chance to address the novel question of whether the commission, which enforces federal antitrust laws, can adopt sweeping regulations such as its nationwide ban on “noncompete” agreements.
More than 20% of U.S. workers have signed noncompete agreements, according to the FTC. The agency, in adopting the rule, had said the agreements limit worker mobility and suppress wages and competition for labor.
Ferguson and other Republicans on the commission have said the FTC has limited rulemaking powers and cannot adopt blanket bans on what it views as anticompetitive conduct.
During Trump’s first term as president, his administration had argued in court that while specific provisions of noncompetes can be unlawful, the agreements themselves were not.
The FTC on Thursday announced its first legal action of Trump’s second term related to noncompete agreements, a settlement barring the largest U.S. pet cremation business from enforcing these agreements with 1,800 workers.
The agency in that case said that the company’s broad agreements, signed even by low-level employees, unlawfully suppressed competitors’ entry into the pet cremation market.
(Reporting by Daniel Wiessner in Albany, New York; Editing by Will Dunham)
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