FTC decides to prohibit ‘noncompete’ agreements for the majority of workers

The Federal Trade Commission (FTC) has approved a new rule that will ban U.S. companies from enforcing noncompete agreements on their employees. These agreements, which prevent workers from taking jobs with competitors for a certain period of time, have been a common practice in many industries, but are now facing scrutiny from the Biden administration.

The FTC voted 3-2 in favor of the ban, citing concerns that noncompete agreements harm workers by limiting their ability to switch jobs for higher pay. The agency also argued that these agreements reduce overall job market churn, making it harder for workers who are not covered by them to find new opportunities. Additionally, the FTC believes that noncompete agreements can hinder the economy by restricting businesses from hiring needed employees.

The rule, which will take effect in six months, has received support from many workers who have felt trapped in abusive workplaces due to noncompete agreements. However, business groups have criticized the measure, arguing that it is too broad and that the FTC does not have the authority to implement such a rule.

The U.S. Chamber of Commerce has announced plans to sue to block the measure, which could delay its implementation for months or even years. Meanwhile, opponents of noncompete agreements point to California as an example of a state where banning such agreements has fostered innovation in the tech industry.

Overall, the debate over noncompete agreements is likely to continue, with both supporters and opponents of the ban making their voices heard in the coming months.