The Federal Trade Commission (FTC) on April 23 said employers could no longer, in most cases, stop their employees from going to work for rival companies.
The sweeping action could help create jobs, raise wages and increase competition among businesses, the agency said. But the action is all but certain to be challenged in court by businesses that say they need to protect trade secrets and confidential information.
The move bars contracts known as non-competes, which prevent workers from leaving for a competitor for a certain amount of time, in most circumstances. Non-competes cover about 30 million US workers, the trade commission said.
The commission said the proposal would raise wages by forcing companies to compete harder for talent. It was approved in a 3-2 vote. Commissioners Melissa Holyoak and Andrew Ferguson, both Republicans, voted against the measure.
“The FTC’s final rule to ban non-competes will ensure Americans have the freedom to pursue a new job, start a new business or bring a new idea to market,” the commission’s chair, Ms Lina Khan, said in a statement.
She estimated that the decision would lead to the creation of 8,500 start-ups in a year and up to US$488 billion (S$663 billion) in increased wages for workers over the next decade.
President Joe Biden celebrated the FTC’s vote in a social media post.
“Workers ought to have the right to choose who they want to work for,” he wrote on X.
But the US Chamber of Commerce vowed to sue the FTC to block the proposal, calling it “an unlawful power grab” in a statement shortly after the vote.
The chamber, as well as the two dissenting commissioners, has argued that the FTC does not have the authority to address this issue and that it should be left to the states.
The rule would become law 120 days after it is published in the Federal Register, which will probably happen in a few days. But legal challenges could delay or block the change.
Non-compete contracts affecting senior executives can remain in effect, the commission said, but employers are barred from trying to impose new non-competes on any employee, including executives. NYTIMES
