Federal Trade Commission Chairwoman Lina Khan said noncompete agreements prevent workers from changing jobs, even if they could make more money or have better working conditions.
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Drew Angerer/Getty Images
Federal Trade Commission Chairwoman Lina Khan said noncompete agreements prevent workers from changing jobs, even if they could make more money or have better working conditions.
Drew Angerer/Getty Images
The Federal Trade Commission voted Tuesday to ban nearly all noncompetes, employment agreements that generally prevent workers from joining competing companies or starting their own businesses.
The FTC received more than 26,000 public comments in the months leading up to the vote. President Lina Khan on Tuesday referenced some of the stories she had heard from workers.
“We have heard from employees who, due to non-competes, have found themselves stuck in abusive workplaces,” she said. “One person noted that when an employer merged with an organization whose religious tenets conflicted with their own, a non-compete kept the worker locked in place and unable to move freely to employment that was not in conflict with its religious practices.”
These stories, she said, “underscored the fundamental reality that depriving people of their economic freedom also deprives them of all kinds of other freedoms.”
The FTC estimates that about 30 million people, or one in five American workers, from minimum wage earners to CEOs, are bound by noncompetes. He says the policy change could lead to wage increases totaling nearly $300 billion a year by encouraging people to freely change jobs.
The ban, which takes effect later this year, provides an exception for existing noncompetes that companies have granted to their executives, on the grounds that such agreements are more likely to have been negotiated. The FTC says employers should not enforce other existing non-compete agreements.
The vote was 3-2 along party lines. The dissenting commissioners, Melissa Holyoke and Andrew Ferguson, argued that the FTC was exceeding the limits of its power. Holyoke predicted the ban would be challenged in court and ultimately overturned.
The U.S. Chamber of Commerce vigorously opposed the ban, saying noncompete measures can benefit both businesses, by allowing them to better protect trade secrets, and employees, by providing greater incentives for employers to to invest in workforce training and development.
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