FTC Adopts Final Rule Banning Employers From Entering Non-Competes

 On April 23rd the FTC voted to approve the Non-Compete Clause rule, which will prohibit almost all non-compete clauses.  A non-compete is a contractual agreement between an employee and an employer that prevents the employee from working for or creating a competing business after they no longer work for the original employer. These agreements often mean employees cannot work in a similar position for another company, even when they were laid off rather than quitting. The agreements are used for all levels of employment, including fast food workers and retail workers. The ruling will prohibit such agreements and requiring existing ones to be rescinded. The FTC claims that the ruling will result in worker earnings increasing by up to $488 billion over the next decade along with the creation of greater than 8,500 businesses yearly. The reason the FTC issued this ruling is because noncompetes limit worker's opportunities and also block them from changing jobs, which ultimately drives down wages. Those against the ruling claim the FTC is not able to issue such a ruling under federal law about anticompetitive practices. They also claim noncompetes are key to protecting trade secrets. If the ruling stays in place, it will be interesting to see how it effects the unemployment rate, as this action would make the labor market even tighter than it already is. 

https://www.reuters.com/world/us/us-agency-poised-ban-worker-noncompete-agreements-2024-04-23/