Scholars cite a body of research showing that the agreements suppress workers’ wages and entrepreneurship, while imposing costs on companies that want to hire workers bound by the agreements. A Department of Labor study released in June 2022 estimated that 18% of Americans are bound by non-compete agreements, although other studies suggest the percentage may be closer to 50%. is suggested. While the system is used in a wide range of industries, including technology, hairstyling, medicine and even dance instruction, it imposes restrictions on both high- and low-wage workers.
The FTC estimates that banning noncompete agreements could create 30 million American jobs and raise wages by nearly $300 billion annually.
“By compiling all of the evidence to date, the FTC strongly argues for an outright ban, and establishes a new gold standard for policymaking in this area,” said Sandeep Vahisan, Open Markets’ legal director. “I think he performed a true public service.” The association proposed a non-compete against the agency in 2019, saying “no employee or professional should be required to sign one of these agreements.”
Business groups opposed to the rule, such as the U.S. Chamber of Commerce, say the contracts are necessary to protect confidential information and training and justify investments in workers that could otherwise quickly jump to competitors. It is claimed that. The Chamber of Commerce has vowed to challenge the rule in court, arguing that it represents a “radical expansion” of the FTC’s authority.
Three states have banned noncompete agreements for more than a century: California, North Dakota, and Oklahoma. In recent years, 11 states and Washington, D.C., have passed laws banning agreements with hourly and below-pay workers.
However, the patchwork nature of the legal landscape makes the ban difficult to enforce. Some legal experts said companies include non-compete clauses in employee contracts regardless of state prohibitions, knowing that workers and competitors will be wary of lawsuits.
While some observers worry that employers will also find ways to work around the FTC rules, Vahisan said the federal rules will bring legal clarity and send a strong message. He said it would be.
“It establishes a bright line instead of this vague standard that exists in most states,” he said. “So everyone will know that these contracts are illegal.”
correction
A previous version of this article incorrectly stated that the rule would go into effect after 180 days. The article has been corrected.
