The Federal Trade Commission has proposed a new rule that would bar the use of non-compete clauses in employment contracts.
About 1 in 5 workers have signed these clauses, which prevent them from joining a competing business or starting their own business for months or even years after leaving a company.
A small number of states have banned noncompetes. Others have restricted their use, particularly for low-wage hourly workers.
Researchers say there’s another reason to eliminate these agreements. They may disproportionately harm women and people of color. What's more, getting rid of them could lift wages for underrepresented groups.
“There are now several studies which suggest that noncompete agreements more strongly affect women and people of color,” said Evan Starr, assistant professor of economics at the University of Maryland.
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Employers say noncompetes protect trade secrets and other confidential business information while helping them retain workers in a tight labor market. These clauses also encourage companies to invest in training and career development, they say.
The FTC argues that noncompete agreements artificially suppress wages, even for workers who do not have them, decrease competition in the labor market and kill innovation.
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