The FTC called noncompetes "an exploitative practice" negatively impacting wages, innovation, and new business creation.
The Federal Trade Commission (FTC) is wading into the area of employment agreements as part of its aggressive posture on fighting unfair methods of business competition.
On Thursday, the commission voted to propose a rule that would ban employers from imposing noncompete agreements on their workers. In the press release, the FTC called noncompetes “a widespread and often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses.”
Noncompete agreements, or clauses within employment agreements, prevent a worker from working for competitor companies (for a set time or within the employer’s industry) during or after their current employment, according to the National Employment Law Center. The agreements are largely governed by individual states’ laws.
The FTC’s proposed rule would generally prohibit employers from using noncompete clauses. Specifically, the FTC’s new rule would make it illegal for an employer to:
Enter into or attempt to enter into a noncompete with a worker;
Maintain a noncompete with a worker; or
Represent to a worker, under certain circumstances, that the worker is subject to a noncompete.
More than 30 million workers — at least 18% of the U.S. workforce — are required to sign noncompetes as a condition to accepting a job, according to the National...
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