Non-Compete Agreements For Most American Employees Now Banned By The FTC

(PatriotPostNews.com) – This week, the Federal Trade Commission (FTC) passed a new regulation prohibiting non-compete clauses from being inserted into employee contracts in the United States.

The 3-2 vote of approval was taken on Tuesday April 23 and is said to defend the rights of American workers to switch jobs, “boost innovation” in the workforce, and promote the development of new business. Non-compete clauses generally prevent employees from entering into business that would be deemed a competition with their employers.

According to Lina Khan, chair of the FTC, these clauses work against American workers by retaining low wages, “suppress[ing] new ideas,” and inhibiting the economy. She noted that, with the ban on non-compete clauses in contracts, over 8,500 startup companies would be launched.

While the rule generally prohibits non-compete clauses from being inserted into employee contracts, there is a caveat in place for “senior executives,” who can be held to such pre-existing agreements while lower-status employees cannot.

During a previous period of public feedback that received 26,000 comments, the FTC finalized its decision to remove the clauses, declaring them unfair for employees. Khan also said that the official ban will give workers the “freedom” to switch jobs, start their own business, and suggest “a new idea” into the market.

The FTC also stated that the official version of the rule will increase pay for employees as well as innovation and American patents, which could rise by up to 29,000 more each year for the coming decade. Previously, the federal agency described non-compete clauses as “widespread” but “often exploitative” to work against employees and their business efforts.

Despite its passage by the FTC, the new regulation is anticipated to be challenged legally. The United States Chamber of Commerce has already expressed plans to file a lawsuit to prevent the rule from taking effect, describing it as “unlawful” and a “blatant power grab.” The chamber added that it would “undermine” businesses in America and take away their “ability to remain competitive.”