U.S. prepares to prohibit non-compete clauses

U.S. prepares to prohibit non-compete clauses

Friday, January 6, 2023

A proposed ban on non-compete clauses would unshackle an estimated 30 million workers in the United States. The U.S. Federal Trade Commission (FTC) has filed notice that it intends to decree such employer-imposed conditions are unfair competition, which would rescind current non-compete agreements and prohibit them in the future.

The proposed rule has been posted for public comment until March 5, 2023. Accompanying background from the FTC maintains that workers are effectively coerced into non-compete agreements due to employers’ disproportionate bargaining power. In turn, this serves to suppress wages through contrived control of job turnover and to inhibit the launch of new businesses.

“By design, non-competes often close off a worker’s most natural alternative employment options: jobs in the same geographic area and professional field,” observes a joint statement from FTC chair Lisa Khan and commissioners Rebecca Kelly Slaughter and Alvaro Bedoya. “These restrictions can undermine core economic liberties, burdening Americans’ ability to freely switch jobs.”

Non-compete clauses are common across U.S. industry sectors and job levels, from service sector roles to technical and professional fields to senior management positions. As part of the public consultation exercise, the FTC is seeking input on whether low- and high-wage workers should be treated equally under the rule and whether senior executives should be exempt.

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