The FTC estimates 18 percent of the U.S. workforce is covered by noncompete agreements. That’s around 30 million people ranging from fast food workers to CEOs.
If the final rule goes into effect, it would ban new noncompete agreements. Companies will also have to throw out existing noncompete agreements for most employees.
In a change from the original proposal, however, the final rule carves out an exception for existing agreements covering senior executives, which may remain in effect.
The FTC says the new rule will give workers more freedom to change jobs and increase their earnings, as well as promote competition and entrepreneurship in the U.S. economy.
“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,” FTC Commissioner Rebecca Slaughter (D) said in prepared remarks.
The new rule is slated to go into effect 120 days after it’s published in the Federal Register.
But its future is uncertain, as at least one business lobbying giant says it plans to sue the FTC to block the law from going into effect.
Big business warned noncompete agreements are necessary to protect proprietary information and intellectual property, although the rule would not ban other measures to achieve that goal, including nondisclosure and confidentiality agreements. They also question the agency’s authority to issue the blanket, retroactive ban.
Chamber President and CEO Suzanne Clark called the new rule “a blatant power grab that will undermine American businesses’ ability to remain competitive.”
“This decision sets a dangerous precedent for government micromanagement of business and can harm employers, workers, and our economy,” Clark said.
“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.”
The Hill’s Taylor Giorno has more here.
