FTC to Ban Non-Compete Agreements in 2024, Aiming to Boost Worker Mobility and Pay

The FTC plans to ban non-compete agreements, aiming to boost worker mobility and pay. This move could reshape the US labor market, but faces pushback from business groups. The vote is set for April 25, 2024.

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Aqsa Younas Rana
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FTC to Ban Non-Compete Agreements in 2024, Aiming to Boost Worker Mobility and Pay

FTC to Ban Non-Compete Agreements in 2024, Aiming to Boost Worker Mobility and Pay

The U.S. Federal Trade Commission (FTC) is set to approve a rule on April 25, 2024, that will ban non-compete agreements, aiming to improve worker mobility and pay in the United States. The rule is anticipated to impact a wide range of industries and workers, potentially resulting in increased competition and higher wages as employees have more freedom to change jobs.

The proposed ban would prohibit employers from requiring job candidates to sign non-compete agreements as a condition of employment, and existing non-compete agreements must be rescinded. The FTC estimates the rule could increase workers' earnings by nearly $300 billion per year and improve job opportunities for 30 million Americans.

The move by the FTC is part of a broader effort to address concerns about the impact of non-compete agreements on the labor market and worker rights. While some states already have restrictions on non-competes, the FTC ban would supersede weaker state laws. The ban would apply to both employees and those with at least a 25% equity interest in a company, with a sale-of-business exception.

Why this matters: The FTC's ban on non-compete agreements has the potential to significantly reshape the U.S. labor market, giving workers more freedom to change jobs and negotiate higher wages. The move could also spur innovation and entrepreneurship by allowing employees to start their own businesses without fear of legal repercussions.

However, the proposed rule has faced pushback from business groups, who argue that non-competes are essential for protecting trade secrets and promoting competitiveness. The U.S. Chamber of Commerce has threatened to sue the FTC if the rule is approved, arguing the FTC lacks the power to ban non-compete agreements.

Companies are already preparing for the possibility of the ban by rethinking their use of non-competes and exploring alternative strategies, such as using non-disclosure and non-solicitation agreements, or negotiating 'garden leave' periods with outgoing employees.

The FTC's vote on the proposed final rule is scheduled for April 25, 2024, and will be open to the public via live webcast. The webcast and any related comments made will be available on the FTC's website after the meeting. Despite the expected legal challenges, the non-compete ban has received bipartisan support in Congress, signaling a potential shift in how the U.S. approaches worker mobility and competition in the labor market.

Key Takeaways

  • FTC to ban non-compete agreements on April 25, 2024, to improve worker mobility and pay.
  • Ban could increase workers' earnings by $300B/year and benefit 30M Americans.
  • Ban would supersede weaker state laws and apply to employees and some equity holders.
  • Business groups oppose the ban, arguing it lacks FTC authority and threatens trade secrets.
  • FTC vote on the final rule will be open to the public via live webcast on April 25, 2024.