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FTC Looks To Ban Non-Compete Clauses That Keep Workers From Changing Jobs

 |  January 5, 2023

The US Federal Trade Commission released a proposal banning existing and future non-compete clauses that can restrict workers from taking jobs with a competitor or starting a competing business.

Supporters of the move say eliminating the agreements will boost employee earnings and spur innovation and entrepreneurship.

Non-compete agreements “undermine core economic liberties,” said FTC chair Lina Khan in a tweet.

“Evidence shows that noncompetes also reduce innovation, entrepreneurship, and new business formation. Locking workers in place can enable incumbents to close off markets to new rivals, undermining dynamism and healthy competition,” she added.

Approximately one-in-five workers or 30 million Americans are bound by a non-compete agreement, according to the FTC. The agreements typically last for a set period and within a certain geographic area.

Read more: For Once, The FTC Is Considering A Merger That Helps The Workers

The employment clauses have been particularly contentious and polarizing in the technology sector.

The agency estimated that if the rule goes into effect, wages to US workers would rise by $300 billion per year and an estimated 30 million Americans would have better career opportunities.

The rule, which could be months away from taking effect, would also require companies with existing noncompete agreements to scrap them and to inform current and past employees that they have been canceled.

It would also stop companies from requiring workers to reimburse them for certain kinds of training if they leave before a certain period of time, a strategy some companies began using when noncompete provisions garnered tougher scrutiny. The training repayment would be banned if it “is not reasonably related to the costs the employer incurred for training the worker,” the proposed rule said.