Breaking news: FTC proposes ban on noncompete clauses, which keep workers from moving to rival firms
The ban would make it illegal for companies to enter into noncompete contracts with employees or continue to maintain such contracts if they already exist, and it would require that companies with active noncompete clauses inform workers that they are void. Such agreements typically prevent workers from getting jobs at a competitor of a current or former employer for a defined period.
The FTC estimates that banning noncompete contracts would open new job opportunities for 30 million Americans and raise wages by $300 billion a year. If enacted, the rule could send shock waves across a wide range of industries.in the United States are bound to noncompete clauses across a variety of jobs, from hairstylists to software engineers to nurses.
Under its current Democratic majority, the FTC voted 3-1 to publish a notice about the proposed rule, the first step in its rulemaking process. The prospect of banning noncompete agreements has been met with some backlash from the business community. The U.S. Chamber of Commercethat the agency “lacks legal authority” to enforce such a rule that “would harm consumers by banning the many pro-competitive aspects of noncompetes.”
A record tight labor market fueled by supply chain shortages and the coronavirus pandemic has forced many companies over the past year to raise wages and improve conditions, as workers have used their leverage to quit and change jobs, especially in low-wage industries, such as hospitality. But workers covered by noncompete clauses haven’t had the same power because the labor market in such jobs has been artificially constrained.
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