FEDERAL TRADE COMMISSION PROPOSED A NEW RULE TO BAN NONCOMPETE CLAUSES

10/01/2023

US antitrust authority Federal Trade Commission proposed a new rule that would prohibit employers from imposing noncompete clauses on their employees’ contracts, which is a common practice that not only limits competition but also supresses wages and hampers innovation.

According to FTC, noncompetes restrict workers’ flexibility to change jobs freely, thus depriving them of higher wages and better working conditions, which also leads to a less innovative and a less competitive economic environment. To address these problems FTC’s proposed rule would prohibit employers from using noncompete clauses. Specifically, the new rule would make it illegal for an employer to:

• enter into a noncompete with a worker,
• maintain a noncompete with a worker and
• represent to a worker that under certain circumstances, the worker is subject to a noncompete.

The proposed rule would apply to any labor contract, paid or unpaid. FTC estimates that with the implementation of the rule, the wages could increase by 300 billion dollars per year and career opportunities could expand for 30 million American citizens.

(FTC – 05.01.2023)

 

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