Written By Digital Content Editor Thomas Ahearn
On January 5, 2023, the Federal Trade Commission (FTC) proposed a new rule that would ban employers from imposing noncompetes on their workers, “a widespread and often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses,” according to an FTC press release.
The FTC estimates that one in five American workers – roughly 30 million people – are bound by a non-compete clause that restricts them from pursuing better job opportunities due to a contractual term between them and employers that blocks the worker from working for a competing employer or starting a competing business.
The proposed rule – which the FTC estimates would increase American workers’ earnings between $250 billion and $296 billion per year – would make it illegal for employers to enter into a noncompete with a worker, maintain a noncompete with a worker, or represent to a worker that the worker is subject to a noncompete.
The FTC is seeking public comment on the proposed rule, which is based on a preliminary finding that noncompetes constitute an unfair method of competition and therefore violate Section 5 of the Federal Trade Commission Act (FTC Act). The comment period for the proposed rule is open through March 10, 2023.
“The freedom to change jobs is core to economic liberty and to a competitive, thriving economy,” FTC Chair Lina M. Khan stated. “Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand.”
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