The U.S. Federal Trade Commission (FTC) is poised to ban worker ‘noncompete’ agreements, a move that has drawn both support and criticism.
The proposed rule, which is expected to be approved on Tuesday, would prohibit agreements that prevent workers from joining their employers’ competitors. The FTC argues that such agreements limit worker mobility and suppress their pay.
However, major business groups have criticized the proposal, saying that noncompetes are a crucial way for companies to protect trade secrets and that they promote competitiveness. The U.S. Chamber of Commerce has already said that it will sue the FTC if the rule is approved.
The rule, if approved, would require companies with existing noncompete agreements to scrap them and to inform current and past employees that they will not be enforced. It is estimated that the rule could increase workers’ earnings by nearly $300 billion per year and would improve the job opportunities of 30 million Americans.
Several states have already banned noncompete agreements, including California, Minnesota, Oklahoma, and North Dakota. At least a dozen other states have passed laws limiting their use.
The FTC’s proposed rule is part of a broader effort by the Biden administration to promote worker rights and increase competition in the labor market. The FTC has also recently proposed a rule that would ban employers from requiring workers to sign arbitration agreements that prevent them from filing class action lawsuits.
The FTC’s proposed rule on noncompete agreements is likely to face legal challenges from business groups. However, if the rule is upheld, it could have a significant impact on the labor market and could lead to higher wages and more job opportunities for workers.
