The Federal Trade Commission (FTC) has decided to shake things up by putting the brakes on noncompete agreements—the contracts that stop you from jumping ship to a competitor or starting your own gig after you leave a job. According to The Hill, the FTC’s latest move could change the game for around 30 million workers; that’s about one in five people across the U.S.
The decision came down with a tight 3-2 vote, split right along party lines. Turns out, it’s not just the CEOs and white-collar employees who are tangled up in these noncompete clauses. A study by the Federal Reserve Bank of Minneapolis pointed out that even people earning around $20 per hour or less, including many in fast food, are locked into these agreements.
“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” FTC Chair Lina M. Khan said. “The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”
More than 10% of these workers are in the same boat, as reported by the Associated Press. Over the last few months, the FTC has been sifting through a heap of public feedback—over 26,000 comments on this hot topic. Khan said that they heard from people who “were stuck in abusive workplaces” due to noncompetes.
The agency’s new rule doesn’t just throw out noncompetes; it goes a step further. Companies will now need to tell all their current and former employees that they are ditching these clauses. Plus, they have to scrap most existing noncompete agreements. There’s a catch, though—for the big bosses, the top execs, noncompetes can still be a thing.
This policy is supposed to kick in later this year, but not everyone is on board. Commissioners Melissa Holyoke and Andrew Ferguson opposed the new rule, claiming the FTC might be out of line with the ban.
What’s more, the U.S. Chamber of Commerce and other business interests have already sued the FTC in a Texas federal court over the ban. The lawsuit argues that the agency “exceeded its administrative authority by outlawing what it deems ‘unfair methods of competition.'” Essentially, the Chamber thinks the FTC is trying to rewrite the rulebook on what counts as fair play in business and aims to block the enforcement of the ban.
So, whether you’re flipping burgers or mergers, the FTC’s noncompete ban could mean more freedom on where you take your talents next. But buckle up—it looks like the road to this new era of work freedom might be bit bumpy with plenty of legal challenges on the horizon.
