The FTC has banned noncompete agreements

The Federal Trade Commission has voted to prohibition noncompete agreements nationwide, saying that they are an “unfair method of competition.”

Noncompete agreements — which effort to forestall labor from moving for aliases starting competing businesses — are particularly prevalent successful nan world of tech, wherever we’ve seen companies for illustration Amazon enforce and past retract a noncompete statement for storage workers. Acer moreover sued its erstwhile CEO for allegedly breaching a noncompete argumentation by becoming a advisor for Lenovo.

The alteration will unit companies to reverse existing noncompete agreements and notify labor astir nan change. Existing noncompete agreements for elder executives tin enactment successful place, but companies can’t participate aliases enforce caller agreements. (The FTC defines elder executives arsenic workers successful “policy-making” decisions who gain much than $151,164 annually.)

The FTC recovered that location are respective alternatives to noncompete agreements, including waste and acquisition concealed laws and non-disclosure agreements. “Noncompete clauses support wages low, suppress caller ideas, and rob nan American system of dynamism,” FTC Chair Lina Khan says successful a statement.

The FTC first proposed banning noncompete agreements successful January 2023 and estimates that astir 30 cardinal workers are presently locked into one. The agency says nan prohibition will lead to nan creation of complete 8,500 businesses each twelvemonth while besides lowering healthcare costs and raising compensation for workers. The caller norm will spell into effect 120 days aft it’s published successful nan Federal Register.