The Federal Trade Commission has voted to ban for-profit US employers from requiring employees to sign agreements with noncompete clauses. This decision could impact millions of workers across the country. President Joe Biden supported the move, stating that workers should have the freedom to choose their employers without being restricted by noncompete agreements.
The ban, approved by a 3-to-2 vote among the FTC commissioners, aims to eliminate noncompete clauses for most workers. The rule prohibits for-profit employers from implementing new noncompetes and renders existing agreements unenforceable, except for senior executives earning over $151,164 annually in policy-making roles.
The FTC argues that noncompete agreements limit job mobility, suppress wages, hinder innovation, impede entrepreneurship, and undermine fair competition. The agency suggests that confidentiality clauses can safeguard trade secrets without the need for noncompetes.
This nationwide ban supersedes state laws on noncompete agreements, with only a few states like California, North Dakota, and Oklahoma already having similar restrictions in place. The FTC estimates that the ban could increase wages and benefits by up to $488 billion over the next decade.
Legal challenges from employers and business groups are expected, potentially delaying the implementation of the rule. Critics, including the US Chamber of Commerce, view the ban as an overreach of administrative power and a threat to traditional business practices.
Despite potential legal hurdles, a nationwide ban on noncompete clauses could provide relief to rank-and-file workers seeking job changes. Employee-side attorneys recommend that workers understand the terms of any noncompete agreements they are asked to sign and seek legal advice if needed to navigate the complexities of such contracts.
