FTC votes to prohibit noncompete clauses

The Federal Trade Commission on Tuesday afternoon voted to institute a ban on noncompete clauses. The FTC proposed the ban in January 2023. The rule would prevent the enforcement of terms that forbid employees from leaving and competing with their employers. A 2014 study found that roughly one in every five Americans was working under noncompete clauses, and a higher percentage had previously worked under a noncompete clause.

Why is the FTC opposed to a noncompete clause? According to the FTC’s proposed rule, the clauses strangle competition, reduce innovation, and suppress potential earnings for all workers. The FTC has said that making noncompete clauses illegal could provide roughly $300 billion per year in wage growth to the U.S. workforce for roughly 30 million Americans.

Does anyone oppose this? Last year, the U.S. Chamber of Commerce criticized the ban on the noncompete clause. The chamber’s chief economist, Curtis Dubay, said the plan would not benefit workers as the FTC claimed it would. He also questioned the FTC’s mathematics regarding the number of workers affected and how much wage growth the law could provide.

Dig deeper: From the WORLD archives, listen to Sarah Schweinsberg’s report about the FTC Chair Lina Khan’s desire to knock down the giants of big tech.