FTC Announces Rule Banning Noncompetes

[ruet]

Source: FTC

Today, the Federal Trade Commission issued a final rule to promote competition by banning noncompetes nationwide, protecting the fundamental freedom of workers to change jobs, increasing innovation, and fostering new business formation.

“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” said FTC Chair Lina M. Khan. “The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”

The FTC estimates that the final rule banning noncompetes will lead to new business formation growing by 2.7% per year, resulting in more than 8,500 additional new businesses created each year. The final rule is expected to result in higher earnings for workers, with estimated earnings increasing for the average worker by an additional $524 per year, and it is expected to lower health care costs by up to $194 billion over the next decade. In addition, the final rule is expected to help drive innovation, leading to an estimated average increase of 17,000 to 29,000 more patents each year for the next 10 years under the final rule.

Noncompetes are a widespread and often exploitative practice imposing contractual conditions that prevent workers from taking a new job or starting a new business. Noncompetes often force workers to either stay in a job they want to leave or bear other significant harms and costs, such as being forced to switch to a lower-paying field, being forced to relocate, being forced to leave the workforce altogether, or being forced to defend against expensive litigation. An estimated 30 million workers—nearly one in five Americans—are subject to a noncompete.

Read more: https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes

[hueymahl]

1. Fantastic!

Perhaps the most impactful thing the FTC has done in decades!

[erronis]

2. This will definitely end up with a challenge in the SCOTUS

These non-competes are part of the blood flowing through corporate America. There'll be lots of $$ spent arguing this case in front of a RW court.

[unblock]

3. Noncompetes are hard to enforce. In practice, it's more of an intimidation thing.

Generally, you can't deprive someone of their livelihood. If you do something that's really unskilled or that has skills that can easily be used in a non-competing business, then sure, it can be enforced.

But often, that's not the case. You may have a degree in a particular field, and in any event learned a particular industry at work. If you learn how to program ai, or how to be a customer service representative for an insurance company, or a debt collector, you can be forced to just learn a new trade or throw away your expertise.

But most people don't want to chance it and risk a lawsuit because the damage to their career and wallet could be massive.

So it's a good rule to knock down that crap.

Now, though, look for non-disclosure enforcement to skyrocket as former employers accuse the jumpers of taking confidential information with them...

[Shermann]

4. Sort of a mixed bag for some

Sometimes these are tied to bonuses and the recipients may be sad to see them go. Of course, if one already received the bonus, they seem to be free and clear.

[cstanleytech]

6. More likely the incentives being offered will increase to retain employees rather than see them go to a competitor.

[cstanleytech]

5. This should give companies more incentive to treat their employees better.

[erronis]

7. Didn't take long: US Chamber of Commerce to sue FTC for banning noncompetes in most jobs

https://www.theregister.com/2024/04/24/noncompetes_ban_ftc/