NOW: Nationwide Ban Issued

( – The Federal Trade Commission (FTC) has made a significant decision voting in favor of a nationwide ban on noncompete agreements, which are used by companies to prevent their employees from taking jobs with competitors in the same industry.

The new rule, which the FTC approved in a 3-2 vote, is expected to take effect 120 days after being officially published in the Federal Register.

However, business groups are likely to oppose it. Shortly after the vote, the U.S. Chamber of Commerce announced its intention to sue the agency over the rule, CNBC reports.

If the rule is officially implemented, it will not only prevent the inclusion of new noncompete clauses but also require companies to eliminate existing ones for all employees except senior executives who earn more than $151,164 annually and are in policy-making roles.

President Joe Biden expressed his support for the decision.

“Workers ought to have the right to choose who they want to work for,” he stated.

According to the FTC, approximately 30 million American workers, or roughly 18% of the workforce, are currently bound by noncompete agreements.

These clauses in an employee’s contract may prohibit them from joining a competing company within the same industry, even if it means pursuing better career opportunities, higher compensation, or a more suitable geographic location.

“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” said FTC chairwoman Lina Khan.

The FTC had initially proposed the ban on noncompetes in January 2023 and has received over 26,000 comments on the proposal, the majority of which were in support, according to the agency.

The FTC argues that noncompete agreements hinder the efficiency of the labor market and can result in “increased market concentration and higher prices for consumers.”

On the other hand, business trade groups argue that noncompete agreements help protect intellectual property and company secrets.

The FTC suggests that companies utilize alternative methods such as non-disclosure agreements to safeguard proprietary information.

Tuesday’s vote is the latest action from the FTC, which has been actively involved in President Joe Biden’s broader campaign against large corporations and the regulations that enable them to dominate markets.

The agency, along with the Department of Justice’s antitrust division, has filed numerous lawsuits against proposed corporate mergers in recent years.

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