On Tuesday, April 23rd, the Federal Trade Commission (FTC) cast a pivotal 3-2 vote to ban noncompete agreements, a decision impacting around 30 million American workers from various sectors, from entry level to top executives. Historically, these agreements have been a staple in employment contracts, designed to prevent employees from joining competing firms or starting similar businesses shortly after their tenure ends. However, under the new rule, most workers will be freed from these noncompete agreement restrictions, with only senior executives remaining subject to the old constraints.
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The FTC argues that noncompete clauses unfairly restrict workers’ mobility and depress wages by limiting competition for labor. Commissioner Rebecca Slaughter emphasized that a noncompete agreement makes it “profoundly unfree and unfair” for people to be trapped in jobs or forced to leave their industry or home to find new employment.
This decision has drawn a clear line between its supporters and detractors. Proponents applaud the FTC for championing worker freedom and potentially boosting U.S. wages by up to $300 billion annually. Critics, such as the U.S. Chamber of Commerce, insist that noncompetes are essential for protecting proprietary information and intellectual property. They also challenge the FTC’s authority to enforce such a sweeping, retroactive ban without explicit authority to do so from congress.
The controversy extends into the legal realm, with the Chamber of Commerce planning to sue the FTC, arguing the commission has exceeded its regulatory bounds. This is not the first such confrontation under President Biden’s administration, which has aggressively pursued regulations aimed at curbing anti-competitive practices across various industries.
Editor’s note: This article is brought to you in collaboration with Scottsdale Professionals Collective.
Author: Tyler K. Allen is an employment attorney, founder of Tyler Allen Law Firm, and neutral workplace investigator located in Phoenix, Arizona.
