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FTC Bans Noncompete Agreements: A Game-Changer for Workers and Businesses

An Asian woman in a blazer being interviewed by another woman. There are two quotes from FTC Chair Lina M. Khan in Yellow overlay boxes.  "The freedom to change jobs is core to economic liberty and to a competitive, thriving economy." and “Noncompete clauses keep wages low, suppress new ideas.”

In a landmark decision, the Federal Trade Commission (FTC) has issued a final rule banning noncompete agreements nationwide, effective 120 days after publication in the Federal Register. This move is set to revolutionize the job market, fostering innovation, and boosting the economy.

Noncompete agreements, which affect an estimated 30 million workers in the United States, have long been criticized for suppressing wages, stifling new ideas, and limiting workers' freedom to change jobs or start their own businesses. The FTC's rule aims to address these concerns and create a more dynamic and competitive job market.

Key Takeaways from the FTC's Final Rule:

  1. Existing noncompetes for the vast majority of workers will no longer be enforceable after the rule's effective date.

  2. Employers are banned from entering into or attempting to enforce any new noncompetes, even for senior executives.

  3. Employers must provide notice to workers (other than senior executives) bound by an existing noncompete that it will not be enforced against them.

  4. The rule is expected to generate over 8,500 new businesses each year, raise worker wages, lower health care costs, and boost innovation.

While the rule allows existing noncompetes for senior executives (defined as those earning more than $151,164 annually and in policy-making positions) to remain in force, employers cannot enter into new noncompete agreements with them.

Alternatives to noncompete agreements, such as trade secret laws and non-disclosure agreements (NDAs), will still allow employers to protect proprietary information without restricting workers' freedom to change jobs.

The FTC's decision is a significant victory for workers' rights and is expected to have far-reaching implications for businesses and the economy as a whole. By fostering a more competitive and dynamic job market, the ban on noncompete agreements is set to drive innovation, encourage entrepreneurship, and ultimately benefit both workers and businesses alike.


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