The US Federal Trade Commission is proposing a ban on non-compete clauses in employment contracts that keep workers from switching jobs — a sweeping rule likely to affect millions of Americans.
The proposal would bar employers from entering into or enforcing such clauses with employees or independent contractors and require companies to nullify any existing ones within six months. The ban would exempt companies that want to require an owner or partner selling a business from immediately re-entering the field.
“Non-competes are bad for workers and undermine labor competition,” FTC Chair
About one in five Americans is bound by a non-compete agreement, a March 2022 Treasury Department report found. The figure is higher in some industries, such as technology and health care where studies have found as many as 45% of primary care physicians and between 35% and 45% of tech workers are bound by non-compete clauses.
The agency will accept public comment on the proposal for 60 days and consider those submissions before it issues a final version of the rule.
In a press release announcing the proposal on Thursday, the FTC said the restrictions “block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand.”
Labor advocates and public officials have taken an aggressive stance against practices they see as anticompetitive. State attorneys general, for instance, have secured agreements in recent years from fast food companies to stop prohibiting their franchisees from hiring away each other’s workers.
Silicon Valley companies including
In a July 2021 executive order on competition, President
The agreements, which often bar workers from switching jobs within a certain period, are already illegal in some states, including California, North Dakota and Oklahoma, while Illinois, Washington and others have passed laws limiting their use, particularly among low-wage workers.
The proposal is the FTC’s second major rule under Khan. The agency last year
“The agency is once again taking bold action where necessary to protect competition in the labor markets,”
On Wednesday, the FTC
(Updates with Chamber comment in the seventh and Public Citizen in penultimate paragraphs)
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