FTC Proposes Rule to Ban Non-Compete Clauses
Final Rule Expected to Impact Millions of Workers
Commissioners Vote on Proposed Ban
The Federal Trade Commission (FTC) has proposed a final rule that would ban non-compete clauses in employment contracts, a move that is expected to impact millions of American workers. The proposed rule, which was approved in a 3-to-2 vote by the Commission, would prevent employers from entering into non-compete agreements with employees except for senior executives who comprise less than 1% of the workforce.
An estimated 30 million people, or one in five U.S. workers, are currently bound by non-compete restrictions. These clauses can prevent employees from working for competing businesses within a certain geographic area or time period, even if they are not employed by the former employer.
FTC Chair Lina Khan said, "Non-compete clauses are a form of anti-competitive restraint that harm both workers and the economy. They prevent workers from freely changing jobs, which ultimately suppresses wages and innovation.
The proposed rule would strike down existing non-competes except for those involving senior executives who comprise less than 1% of the workforce. The FTC estimated that the final rule would lead to new business formation growing by 2.1% and wages increasing by 0.4% to 0.8%.
The proposed rule is now open for public comment until March 10, 2023. The Commission will then vote on whether to issue a final rule.
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