Big Shakeup for Workers: FTC Bans Most Non-Compete Agreements

On April 23rd, 2024, the Federal Trade Commission (FTC) dealt a major blow to non-compete agreements, voting to ban them for most workers. This decision has been a long time coming, with supporters arguing that non-competes stifle worker mobility and hurt wages. Opponents, however, worry it could harm businesses by making it easier for employees to leave and take trade secrets with them.

What are Non-Compete Agreements?

Non-compete agreements are clauses in employment contracts that restrict what an employee can do after they leave the company. Typically, they prevent workers from going to work for a competitor for a certain period of time, in a specific geographic area.

Why Did the FTC Vote to Ban Them?

The FTC argues that non-compete agreements hurt workers in several ways:

• Lower Wages: By limiting worker mobility, non-competes can make it harder for employees to negotiate higher salaries at competing companies.
• Reduced Innovation: When workers can’t take their skills to new employers, it can stifle innovation and the creation of new businesses.
• Limited Opportunities: Non-competes can trap workers in low-paying jobs, especially in fields with few employers.

The FTC estimates that banning non-competes could increase wages by nearly $300 billion per year and expand career opportunities for about 30 million Americans.

What’s the Catch?

There is one exception to the FTC’s ban. The new rule will still allow non-compete agreements for high-earning executives, defined as those making over $151,163 annually and in “policy-making positions.” The reasoning is that these workers may have access to more sensitive company information.

What Does This Mean for You?

If you’re a worker with a non-compete clause in your contract, the FTC’s ruling could be a game-changer. Here’s a breakdown:

• For most workers: Existing non-compete agreements are likely unenforceable.
• For high-earning executives: Existing non-compete agreements may still be valid. However, it’s always best to consult with an employment lawyer to understand your specific rights.

What’s Next?

The FTC’s decision is sure to be challenged in court by business groups. It could take months or even years before the final outcome is known.

Looking for More Information?

The FTC’s website has a wealth of information on the new rule, including resources for workers and employers: https://www.ftc.gov/

This is a developing story, so stay tuned for further updates!

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