Federal Trade Commission votes to prohibit noncompete clauses

Federal Trade Commission building in Washington, D.C.

The Federal Trade Commission (FTC) on Tuesday afternoon voted to institute a ban on noncompete clauses.

The FTC proposed the ban in January 2023. If approved, the rule would prevent the enforcement of terms that forbid employees from leaving and competing with their employers.

A 2014 study found that roughly one in every five Americans was working under noncompete clauses, and that a higher percentage had worked under a noncompete clause in the past.

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Why is the FTC opposed to a noncompete clause? The clauses strangle competition, reduce innovation, and suppress potential earnings for all workers, according to the FTC’s proposed rule.

Last January, the FTC said that making noncompete clauses illegal could provide roughly $300 billion per year in wage growth to the U.S. workforce for roughly 30 million Americans.

Does anyone oppose this? The U.S. Chamber of Commerce last year criticized the plan to ban the noncompete clause. The chamber’s chief economist, Curtis Dubay, said the plan would not benefit workers as the FTC claimed it would. He also questioned the FTC’s mathematics regarding the number of workers affected, and how much wage growth the law could provide.

This story originally appeared in WORLD. © 2024, reprinted with permission. All rights reserved.

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