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FTC noncompete agreements ban proposal overview:
- Who: The Federal Trade Commission has proposed a new rule that would ban employers from entering into noncompete agreements with workers.
- Why: The FTC said it preliminarily found noncompete agreements are an unfair method of competition and violate the Federal Trade Commission Act.
- Where: The proposed rule would affect businesses and workers nationwide.
The Federal Trade Commission (FTC) has proposed a new rule that would prevent employers from being able to impose noncompete agreements on their workers.
Proponents of noncompete agreements argue they are exploitative and suppress wages, hinder innovation and keep entrepreneurs from being able to start up a new business, according to the FTC.
The FTC said it estimates that ending noncompete agreements would increase wages by $300 billion each year and increase employment opportunities for around 30 million American workers.
Public comment is being sought on the FTC’s rule proposal, which it said is based on a preliminary finding that such agreements are an unfair method of competition and violate Section 5 of the Federal Trade Commission Act.
“The freedom to change jobs is core to economic liberty and to a competitive, thriving economy,” FTC Chair Lina M. Khan said in a statement. “Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions.”
Noncompete agreements deprive businesses of talent pool, FTC says
Khan added that noncompete agreements end up “depriving businesses of a talent pool that they need to build and expand.”
“By ending this practice, the FTC’s proposed rule would promote greater dynamism, innovation, and healthy competition,” Khan said.
Under the FTC’s proposed changes, employers would no longer be able to enter into or attempt to enter into a noncompete agreement with a worker, maintain a noncompete agreement with a worker or represent to the worker that they are subject to a noncompete agreement under certain circumstances.
Independent contractors and any individual who is employed whether in a paid role or not would also be subject to the proposed rule, which would also require employers to rescind any existing noncompete agreements and inform workers that they did so, according to the FTC.
A class action lawsuit accusing McDonald’s of violating the law by entering into noncompete agreements with franchisees was dismissed last July by a federal judge in Illinois.
Have you entered into a noncompete agreement with an employer? Let us know in the comments.
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One thought on FTC proposes rule to ban noncompete agreements
I had a non complete with my job.
Senior helpers/ Seattle wa