The Economic Policy Institute applauded the Federal Trade Commission’s decision on Tuesday to ban noncompete clauses in employment, saying in a statement on its website that “this is an important step toward fostering fair competition and empowering U.S. workers.”
Noncompete agreements are conditions of employment that prohibit a worker from leaving a job to take a role at a competing business or starting their own within a certain period of time. Research from the Institute has found that up to 25% of workers in the private sector—even low-wage employees—have been required to sign noncompete agreements.
“The only source of leverage nonunionized workers have with respect to their employers is their ability to quit and take a job somewhere else,” the statement reads. “Employers are using noncompete agreements to cut that source of worker power off at the knees.”
The EPI also states that noncompete agreements reduce wages and the formation of new companies, with also stifle the economy’s growth. “Noncompetes are bad for workers, bad for consumers, and bad for the broader economy,” EPI said.
