January 20, 2023
Stephen H. Kaufman
The Federal Trade Commission (FTC) recently announced a proposed rule that if finalized, will ban non-competition agreements nationwide, no matter the size of an employer or the industry. Today, non-competition agreements prohibit departing employees from working in a similar job in a specified geographic area for some length of time after their employment ends. For example, upon leaving a job, a doctor may be prohibited from practicing medicine for two years within 10 miles of her old employer’s office. The proposed rule would prohibit noncompetes on new employees and cancel existing noncompetes. It would apply to almost all workers, including independent contractors, interns and volunteers. The FTC estimates that about 30 million Americans currently have noncompetes.
To support the ban, the FTC reasons that noncompetes unfairly keep people from starting new businesses and suppress wages by over $250 Billion a year because employees cannot freely leave jobs for better paying ones. As explained by FTC Chair Lina Khan: “The freedom to change jobs is core to economic liberty and to a competitive, thriving economy. Noncompetes 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”. Unsurprisingly, not everyone agrees that the rule is a good idea. The U.S. Chamber of Commerce has already announced that it is considering suing if it is finalized.
The FTC is seeking feedback on its proposal. If you want to comment, visit https://www.regulations.gov/document/FTC-2023-0007-0001 before March 10, 2023. The FTC will consider changes based on the comments it receives. We will issue updates as new information becomes available.