The Federal Trade Commission (FTC) voted 3-2 Tuesday to ban non-compete agreements that prevent tens of millions of employees from working for competitors or starting a competing business after they leave a job.
From fast food workers to CEOs, the FTC estimates 18 percent of the U.S. workforce is covered by non-compete agreements — around 30 million people.
The final rule would ban new non-compete agreements for all workers and require companies let current and past employees know they won’t enforce them. Companies will also have to throw out existing non-compete agreements for most employees, although in a change from the original proposal, the agreements may remain in effect for senior executives.
“It is so profoundly unfree and unfair for people to be stuck in jobs they want to leave, not because they lacked better alternatives, but because non-competes preclude another firm from fairly competing for their labor, requiring workers instead to leave their industries or their homes to make ends,” said FTC Commissioner Rebecca Slaughter (D) in prepared remarks.
The new rule is slated to go into effect in 120 days after it’s published in the Federal Register. But its future is uncertain, as pro-business groups opposing the rule are expected to take legal action to block its implementation.
Business groups say non-compete agreements are critical for protecting proprietary information and intellectual property, although the rule would not ban other methods for protecting that information including non-disclosure and confidentiality agreements. They also question the agency’s authority to issue the blanket, retroactive ban.
