Home News FTC proposes rule that would ban noncompete clauses

FTC proposes rule that would ban noncompete clauses


The Federal Commerce Fee is proposing a brand new rule that might stop employers from imposing noncompete clauses for employees that prohibit them from becoming a member of a competitor, sometimes for a time frame, after they depart the corporate.

The proposed rule launched Thursday follows an government order signed by President Joe Biden in 2021 focusing on what he labeled anticompetitive practices in tech, well being care and different components of the economic system. The order included a name for banning or limiting noncompete agreements to assist enhance wages.

The FTC proposal is predicated on a preliminary discovering that noncompete clauses quash competitors in violation of Part 5 of the Federal Commerce Fee Act. Part 5 bans unfair strategies of competitors.

“Noncompetes block employees from freely switching jobs, depriving them of upper wages and higher working situations, and depriving companies of a expertise pool that they should construct and broaden,” Chair Lina M. Khan stated in a ready assertion.

The proposed rule would make it unlawful for an employer to enter into or try and enter right into a noncompete with a employee; keep a noncompete with a employee; or signify to a employee, beneath sure circumstances, that the employee is topic to a noncompete.

It could apply to impartial contractors and anybody who works for an firm, whether or not paid or unpaid. It could additionally require employers to rescind current noncompete clauses and actively inform employees that they’re not in impact.

The proposed rule would typically not apply to different kinds of employment restrictions, like non-disclosure agreements, however different kinds of employment restrictions may very well be topic to the rule if they’re so broad that they operate as noncompete clauses.

The company estimates that the brand new proposed rule may enhance wages by practically $300 billion a 12 months and broaden profession alternatives for about 30 million Individuals.


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