FTC Proposes Rule Banning Non-Compete Clauses

The Federal Trade Commission on Thursday proposed a rule that would bar U.S. employers from imposing non-compete clauses on their workers. This is a drastic measure that can make it easier for people to change jobs and deepen labor competition in a wide range of industries.

of Proposed rule Prevents employers from imposing contract clauses that prohibit employees from joining competitors, usually for a period of time after leaving the company.

Proponents of the new rules argue that non-compete agreements contribute to wage stagnation because one of the most effective ways to secure higher wages is to switch companies. They claim the clause has become so commonplace that it has wiped out even low-wage workers.

Opponents argue that by promoting employee retention, especially in a tight labor market, the non-compete clause encouraged companies to promote their employees and invest in training. The public has 60 days to submit comments on the rule before it takes effect.

At a cabinet meeting, President Joe Biden called the FTC’s action “a major step forward in banning non-compete agreements that are simply meant to drive people’s wages down.”

“These agreements are preventing millions of retail workers, construction workers and other workers from getting better jobs, better wages and benefits in the same sector.” Biden said.

FTC actively curb the power of large corporations Law scholar and Biden-appointed outsider in Washington under Lina Kern exhibited a strong antitrust stance.

The agency estimates that the new rule could increase wages by about $300 billion annually and expand career opportunities for about 30 million Americans.

“Non-competition prevents workers from freely changing jobs, robs them of higher wages and better working conditions, and robs them of the talent pool that companies need to build and expand,” Khan said in a prepared statement. rice field.

FTC Proposals Are in the Midst an already competitive job market, Especially in an industry that has suffered mass layoffs in the first year of the COVID-19 pandemic and subsequently struggled to recall employees. Many workers remain on the sidelines, working hard in search of better wages, coping with lingering childcare and health issues, or choosing to retire early.

Vanessa Matsis said, “It can lead to the ‘big resignation’ that everyone talks about to some extent, but employees are only losing one tool in their toolbox, and other ways to retain top talent.” There is also in.” -Mr. McCready is Deputy General Counsel and Head of Human Resources at Engage PEO, which provides HR services to small businesses. “You will see a lot of companies trying to retain top talent through pay increases and other benefits,” she said.

Despite high-profile layoff announcements from companies such as software providers, employers across the country are still hiring and layoffs are at historically low levels. Salesforce, Facebook’s parent company MetaWhen AmazonThe government is due to announce on Friday that employers have steadily added 200,000 jobs last month and the unemployment rate stands at 3.7%, the lowest level in nearly half a century.

A 2019 analysis by the liberal Institute for Economic Policy estimated that between 36 million and 60 million workers could be covered by non-compete agreements, and according to the group, companies have increased It is said that they are hiring more and more.

While such agreements are most common among high-wage workers, research shows that a significant number of low-wage workers, including more than a quarter of those earning an average wage of less than $13 an hour, are on an agreement. It turns out that it is targeted.

For example, on Wednesday the FTC acted against three companies that illegally imposed non-compete clauses on workers, including underpaid security guards who were threatened with a $100,000 fine if they breached their contracts.

EPI’s research found that many companies still impose non-compete clauses in some states that already prohibit or restrict them. California has banned this practice for his century.

Proposed FTC rule would require companies to abolish existing anticompetitive causes, actively notify workers that they are no longer valid, and prohibit imposing new ones .

The proposal is based on preliminary findings that the non-compete clause violates Section 5 of the Federal Trade Commission Act and voids competition. Other types of employment restrictions, such as non-disclosure agreements, generally do not apply.

But Emily Dickens, chief of staff and public affairs director for the Human Resources Management Association, said the proposed FTC rule was too broad and could harm the companies that depend on it for success. said to be sexual. She cited very small emerging industries where non-disclosure agreements alone cannot protect critical know-how.

Dickens said SHRM, a group of more than 300,000 HR professionals and executives worldwide, encourages members to present specific circumstances that warrant a non-compete clause during the FTC commentary period. I said I will.

“There are jobs where a non-compete obligation is irrelevant,” Dickens said, but “a blanket ban of this sort would stifle innovation.”