FTC Bans Non-Compete Clauses, Freeing Millions of Workers
Landmark Rule to Protect Employee Mobility and Innovation
April 23, 2024, 3:42 PM
The Federal Trade Commission (FTC) has taken a major step toward protecting worker mobility and fostering innovation in the American economy. On Tuesday, the agency issued a final rule that will ban for-profit US employers nationwide from restricting their employees' ability to work for other companies after leaving their jobs.
The final rule, which takes effect in 60 days, defines "senior executive" as an employee who is directly responsible for setting the company's strategic direction, developing and implementing business plans, and making major decisions on behalf of the organization.
The FTC estimates that less than 1% of workers would be considered senior executives under the final rule. For the vast majority of employees, this ban on non-compete clauses will give them the freedom to seek new opportunities without fear of legal reprisal.
"Non-compete clauses have become increasingly common over the past few decades, and they have had a negative impact on the lives of millions of American workers," said FTC Chair Lina Khan. "Today's rule will restore fairness to the labor market and promote economic growth and innovation."
The FTC's proposed rule, which was first released in October 2022, received overwhelming support from the public. Over 60,000 comments were submitted, with the vast majority of people expressing their support for the ban on non-compete clauses.
The final rule includes several provisions to ensure that it is implemented fairly and effectively. For example, the rule allows employers to still enter into non-compete agreements with employees who are considered "senior executives" and those who have access to sensitive trade secrets.
The FTC's ban on non-compete clauses is a major victory for workers and for the American economy. It will help to create a more level playing field for workers and encourage innovation and economic growth.
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