{"id":27995,"date":"2023-01-05T20:15:22","date_gmt":"2023-01-05T20:15:22","guid":{"rendered":"https:\/\/mailinvest.blog\/index.php\/2023\/01\/05\/ftc-proposes-new-rule-to-ban-noncompete-agreements-in-worker-contracts\/"},"modified":"2023-01-05T20:15:22","modified_gmt":"2023-01-05T20:15:22","slug":"ftc-proposes-new-rule-to-ban-noncompete-agreements-in-worker-contracts","status":"publish","type":"post","link":"https:\/\/mailinvest.blog\/index.php\/2023\/01\/05\/ftc-proposes-new-rule-to-ban-noncompete-agreements-in-worker-contracts\/","title":{"rendered":"FTC proposes new rule to ban noncompete agreements in worker contracts"},"content":{"rendered":"

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The U.S. Federal Trade Commission today <\/span>proposed<\/span><\/a> a new rule that would ban companies from including noncompete clauses in employment contracts.<\/span><\/p>\n

Noncompete clauses prohibit a company\u2019s employees from seeking or accepting work at rival businesses. In some cases, such clauses also impose additional restrictions on employees.<\/span><\/p>\n

\u201cThe freedom to change jobs is core to economic liberty and to a competitive, thriving economy,\u201d said FTC Chair Lina Khan. \u201cNoncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand. By ending this practice, the FTC\u2019s proposed rule would promote greater dynamism, innovation, and healthy competition.\u201d<\/span><\/p>\n

The new rule proposed by the FTC would prevent companies from entering into noncompete agreements with workers or attempting to do so. Companies would also be required to void existing noncompete clauses, as well as inform affected employees of the change.\u00a0<\/span><\/p>\n

According to the FTC, the proposed rule \u201cwould generally not apply to other types of employment restrictions\u201d such as non-disclosure agreements. However, such agreements could be subject to the rule if they effectively function as a noncompete clause.\u00a0<\/span><\/p>\n

The FTC\u2019s proposal of the rule comes about a year and a half after President Joe Biden <\/span>signed<\/span><\/a> an executive order focused on increasing competition in the U.S. economy. The order encouraged the FTC to ban or limit noncompete agreements. Additionally, it launched over 70 other policy initiatives across more than a dozen government agencies.<\/span><\/p>\n

Before proposing the rule banning noncompete agreements, the FTC carried out an investigation into their impact. The agency reached the preliminary finding that such agreements breach Section 5 of the Federal Trade Commission Act. The section states that \u201cunfair methods of competition in or affecting commerce\u201d are \u201chereby declared unlawful.\u201d<\/span><\/p>\n

Last November, the FTC <\/span>announced<\/span><\/a> a new initiative that focuses on \u201creactivating Section 5\u201d to better address anticompetitive practices. The agency has already taken a number of regulatory steps as part of the initiative. Earlier this week, the FTC <\/span>ordered<\/span><\/a> a number of companies to void noncompete agreements that were found to have violated Section 5.<\/span><\/p>\n

\u201cResearch shows that employers\u2019 use of noncompetes to restrict workers\u2019 mobility significantly suppresses workers\u2019 wages\u2014even for those not subject to noncompetes, or subject to noncompetes that are unenforceable under state law,\u201d said Elizabeth Wilkins, the Director of the FTC\u2019s Office of Policy Planning. \u201cThe proposed rule would ensure that employers can\u2019t exploit their outsized bargaining power to limit workers\u2019 opportunities and stifle competition.\u201d<\/span><\/p>\n

The FTC estimates that its proposed rule would expand career opportunities for about 30 million Americans. Additionally, the agency believes that it could increase wages by nearly $300 billion per year.<\/span><\/p>\n

Image: FTC<\/h5>\n
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