The U.S. Federal Trade Commission votes Tuesday to ban nearly all employment agreements that prohibit employees from seeking jobs at competing businesses or launching their own company. The ruling, which will take effect later this year, provides an exception for existing agreements for senior executives because the contracts are more likely to have been negotiated.
During discussions, Chair Lina Khan referenced some of the 26,000 public comments the agency received in the months prior to the vote. “We heard from employees who, because of noncompetes, were stuck in abusive workplaces,” she said. “One person noted when an employer merged with an organization whose religious principles conflicted with their own, a noncompete kept the worker locked in place and unable to freely switch to a job that didn’t conflict with their religious practices.”
About one in five American employees—equivalent to around 30 million people—are restricted by noncompete clauses, the FTC said. This ruling has potential to increase wages totaling nearly $300 billion annually by allowing people to change jobs freely.
After the vote, the U.S. Chamber of Commerce said it will sue the FTC to block the ban, arguing that noncompete agreements are important to companies in efforts to safeguard trade secrets, as well as beneficial to employees by giving them a larger incentive to invest in professional training and development.
