The FTC Moves to Ban Businesses from Requiring Employees to Sign Noncompete Agreements

By Yehudit Garmaise

New York businesses can legally prevent their employees from taking jobs at competing firms, but today the Federal Trade Commission (FTC) proposed completely banning what are called, “non-compete agreements.”

Although many different types of business often require their workers to sign noncompete agreements that could result in pricy fines if broken, in the past few years, more and more employees have complained about the practice. 

The FTC’s proposal follows up on an order from President Joe Biden to curb the use of noncompetes, which were prohibiting competition and depressing salaries as the US economy struggled to recover from the pandemic, the NY Times reported. 

Because most workers get the highest pay raises by moving from one job to another, the FTC says that banning noncompete agreements could substantially increase workers’ wages. 

As more and more states have restricted businesses’ uses of noncompete agreements, many researchers who have examined wages have proven that wages tend to rise when noncompetes are restricted, but salaries fall when businesses are free to enforce noncompete agreements, a researcher who was cited in the FTC’s proposal, told BoroPark24.

The FTC estimated that the noncompete ban could increase wages by nearly $300 billion a year nationally.

 “The freedom to change jobs is core to economic liberty and to a competitive, thriving economy,” said FTC chair Lina M. Khan in a statement. “By ending this practice, the F.T.C.’s proposed rule would promote greater dynamism, innovation and healthy competition.”

The public will be allowed to submit comments on the FTC’s proposal for 60 days, when the agency will finalize its proposal to ban noncompete agreements, but the ban will only take effect 180 days after the publication of its final version.