The Federal Trade Commission on Tuesday banned employers from restricting their employees’ ability to work for competitors. This is a sweeping change that the agency says could help raise wages and increase competition between companies.
In most cases, the move prohibits so-called non-compete agreements, which prevent employees from moving to a competitor for a certain period of time. The agency said the proposal would increase wages by forcing companies to compete more fiercely for talent.
The proposal was approved by the agency by a vote of 3 to 2. Commissioners Melissa Holyoak and Andrew N. Ferguson, two Republicans, voted against the measure.
“The FTC’s final rule banning non-compete agreements will give Americans the freedom to take a new job, start a new business or bring a new idea to market,” said Trade Commission Chairwoman Lina M. Khan. in a statement. She estimated the decision would lead to the creation of 8,500 new startups in a year.
The U.S. Chamber of Commerce vowed to sue the FTC to block the proposal, calling it “an unlawful power grab” in a statement shortly after the decision. Employers have argued that non-compete agreements help protect trade secrets and other confidential information.
The rule would take effect 120 days after it is published in the Federal Register, which likely will be in a few days. But legal challenges could delay or block the change.
Non-compete agreements affecting senior employees can remain in effect, the commission said, but employers are prohibited from attempting to impose new non-compete agreements on an employee.
Studies have shown that non-compete agreements depress wages because changing jobs is the most efficient way for workers to increase their earnings.
“This would be an immediate shock that would allow millions of workers to get better jobs in their industries,” said Evan Starr, an economics professor at the University of Maryland. “I would expect the job market to grow almost overnight.”
This is a developing story. Check back for updates.
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2024-04-23 23:33:20
www.nytimes.com
