FTC Bans Noncompete Clauses to Protect Workers and Competition
Final Rule Issued on April 23, 2024
Background
In January 2023, the Federal Trade Commission (FTC) proposed a rule that would ban noncompete clauses, explaining that they are "a widespread and often exploitative" practice.
Final Rule
On April 23, 2024, the FTC voted 3-2 to issue a final rule that bans noncompete clauses for-profit U.S. businesses.
According to the FTC, noncompete clauses "have a significant impact on workers and businesses." They can prevent workers from switching jobs, starting their own businesses, or competing in the same industry. This can harm competition and hurt workers' wages and job opportunities.
Implications of the Rule
The FTC's final rule will ban the use of noncompete clauses for all employees, except in limited circumstances, such as to protect trade secrets or customer lists.
The rule will take effect 60 days after it is published in the Federal Register. Businesses that violate the rule may face civil penalties of up to $10,000 per violation.
Reaction
The FTC's final rule has been met with mixed reactions. Business groups have expressed concern that the rule will make it more difficult to protect their intellectual property and customer relationships. However, worker advocates have applauded the rule, saying it will help to create a more fair and competitive labor market.
Comments