FTC proposes to abolish non-compete agreements

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The Federal Trade Commission has proposed a rule that would effectively prohibit the use of non-compete agreements, leaving employers with fewer legal options for safeguarding their classified information.

A non-compete clause is a contractual agreement between an employer and a worker that prohibits the worker from working for a competing employer or starting a competing business, typically with geographic and time constraints.

With a limitation, the FTC’s newly proposed rule prohibits employers from imposing non-compete clauses on employees. It is founded on an initial determination that non-compete agreements are an unfair method of competition and thus violate Section 5 of the FTC Act.

According to the proposed rule, non-compete agreements currently impede approximately 30 million American workers, or one in every five, and that prohibiting them “would increase American workers’ earnings between $250 billion and $296 billion per year.” It would thus prohibit employers from requiring employees to accept non-compete clauses and require them to rescind existing non-competes within 180 days of the final rule’s publication.

“By design, noncompetes often close off a worker’s most natural alternative employment options: jobs in the same geographic area and professional field,” FTC Chair Lina Khan wrote in a statement joined by Commissioners Alvaro Bedoya and Rebecca Slaughter. “These restrictions can undermine core economic liberties, burdening Americans’ ability to freely switch jobs.”

The sources for this piece include an article in PCMag.

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