Federal Trade Commission Chairman Lina Khan testifies during a House Judiciary Committee hearing on Federal Trade Commission oversight on Capitol Hill in Washington, DC, July 13, 2023.
Kevin Worm | Reuters
The Federal Trade Commission voted 3-2 on Tuesday to adopt a nationwide ban on non-compete agreements, which are used by companies to prevent employees from taking jobs from competitors in the same industry.
new rule The bill is expected to take effect 120 days after it is officially published in the Federal Register, but business groups are expected to challenge it. Within hours of the vote, the U.S. Chamber of Commerce pledged to sue the agency over the rule.
If formally implemented, the rule would not only prohibit new non-competes but would also force companies to eliminate existing non-competes for all employees except senior executives who earn more than $151,164 a year and hold policy-making positions.
“Workers should have the right to choose who they want to work for,” President Joe Biden said on Tuesday.
The FTC estimates that 30 million U.S. workers, or approximately 18%, are currently subject to non-compete restrictions.
A non-compete clause in an employee contract may prevent someone from working for a competing company in the same industry for better career opportunities, higher pay, or a more suitable location.
“Non-compete clauses keep wages low, stifle new ideas, and deprive the U.S. economy of vitality, including by prohibiting every year after a non-compete,” FTC Chairman Lina Khan said in a press release. The energy of more than 8,500 new start-ups to be created.
The FTC originally filed the non-compete injunction in January 2023. It has since received more than 26,000 comments on the proposal, the vast majority of which were supportive, according to the agency.
The FTC claims that non-competes hinder the efficiency of the labor market and may lead to “increased market concentration and higher consumer prices.”
Meanwhile, business trade groups argue that non-competes help protect intellectual property rights and company secrets. The FTC recommends that companies rely on nondisclosure agreements and other means to protect proprietary information.
Tuesday’s vote is the latest move by the Federal Trade Commission, which has been at the forefront of President Joe Biden’s broader crusade against corporate giants and the rules that help them dominate markets.
The agency, along with the Justice Department’s Antitrust Division, Dozens of lawsuits filed Opposed to proposed corporate transactions over the past few years.
In March, Biden established a task force on corporate pricing practices, co-led by the independent agencies the Federal Trade Commission and the Justice Department. Biden has repeatedly accused businesses of keeping prices artificially high, in part to help the president explain why inflation has been so high over the past few years.
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