Non-Compete Agreements Could Soon Be Banned

Millions of workers are subjected to non-compete agreements. That could be coming to an end. 

The Federal Trade Commission took a bold move aimed at shifting the balance of power from companies to workers. The FTC proposed a new rule that would stop employers from making their workers sign non-compete agreements. 

Non-compete agreements are widespread, affecting some 30 million U.S. workers. That’s one in five workers across America. The FTC said the practice is exploitative. 

Non-compete agreements restrict workers from quitting their jobs and taking new jobs at rival companies or starting up similar businesses of their own within a certain time period. The typical period is anywhere between six months and two years. 

They are used across a wide array of industries, including in high-paying fields such as banking and tech, but also in many low-wage sectors.

Many companies say the clauses protect their trade secrets. But now, the FTC says getting rid of non-competes could help bump U.S. workers’ pay by a whopping total of about $300 billion per year. 

It could also create better career opportunities for nearly 30 million Americans. 

But the rule could take months to go into effect. It still has to go through a public comment period. The public has 60 days, about two months, to offer comment on the proposed rule. Then a final rule could be published. And, it could also face legal challenges.

Employers have argued that they need non-competes to protect trade secrets and investments they put into growing their businesses, including training workers.

A handful of states including California and Oklahoma already ban non-competes, and a number of other states including Maryland and Oregon have prohibited their use among lower-paid employees. But those rules are difficult to enforce, with low-wage workers often reluctant to speak out.

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