FTC Moves To Ban Non Compete Agreements, How Labor Deals Will Be Impacted

The Federal Trade Commission (FTC) has taken a major stride towards reshaping the landscape of labor agreements in the United States by voting 3-2 to ban non compete agreements. 

These agreements have long been criticized for their restrictive nature, preventing millions of workers from pursuing better opportunities and stifling competition in the labor market.

According to the FTC, an estimated 18 percent of the U.S. workforce, roughly 30 million people, are currently bound by noncompete agreements. From fast-food workers to top executives, these agreements have limited employees’ ability to seek employment with competitors or even start their own businesses after leaving their current jobs.

The new rule, which is set to go into effect 120 days after its publication in the Federal Register, represents a significant departure from the status quo. Under the rule, companies will be prohibited from imposing new noncompete agreements on their employees. Additionally, companies will be required to inform current and former employees that they will not enforce existing noncompete agreements.

FTC Commissioner Rebecca Slaughter (D) emphasized the unfairness of noncompete agreements stating, “It is so profoundly unfree and unfair for people to be stuck in jobs they want to leave, not because they lacked better alternatives, but because noncompetes preclude another firm from fairly competing for their labor, requiring workers instead to leave their industries or their homes to make ends.” 

However, the future of the new rule remains unclear, as pro-business groups are expected to challenge the ban by taking legal action.

Suzanne Clark, Chamber President and CEO says the move to ban non competes is, “a blatant power grab that will undermine American businesses’ ability to remain competitive.” 

She added: “This decision sets a dangerous precedent for government micromanagement of business and can harm employers, workers, and our economy. The Chamber will sue the FTC to block this unnecessary and unlawful rule and put other agencies on notice that such overreach will not go unchecked.” 

Furthermore, these groups argue that non compete agreements are essential for protecting proprietary information and intellectual property, and they question the FTC’s authority to issue such a broad ban.

Despite the opposition, there is growing bipartisan support for reforming noncompete agreements at the legislative level. Several bills have been introduced in Congress aimed at addressing the issue, including the Workforce Mobility Act and the Freedom to Compete Act. It’s also been argued that the FTC lacked the authority to issue the rule without explicit direction from Congress. 

“Beginning with policy puts the cart before the horse. No matter how important, conspicuous and controversial the issue, and no matter how wise the administrative solution, an administrative agency’s power to regulate must always be grounded in the valid grant of authority from Congress,” said FTC Commissioner Andrew Ferguson (R). “Because we lacked that authority, the final rule is unlawful.”

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