The Commission also ordered two of the largest U.S. In one complaint, the FTC took action against a Michigan-based security guard company and its key executives for using coercive noncompetes on low-wage employees. The FTC recently used its Section 5 authority to ban companies from imposing onerous noncompetes on their workers. This NPRM aligns with the FTC’s recent statement to reinvigorate Section 5 of the FTC Act, which bans unfair methods of competition. However, other types of employment restrictions could be subject to the rule if they are so broad in scope that they function as noncompetes. The proposed rule would generally not apply to other types of employment restrictions, like non-disclosure agreements. It would also require employers to rescind existing noncompetes and actively inform workers that they are no longer in effect. The proposed rule would apply to independent contractors and anyone who works for an employer, whether paid or unpaid. represent to a worker, under certain circumstances, that the worker is subject to a noncompete.maintain a noncompete with a worker or.enter into or attempt to enter into a noncompete with a worker.Specifically, the FTC’s new rule would make it illegal for an employer to: To address these problems, the FTC’s proposed rule would generally prohibit employers from using noncompete clauses. This ultimately harms consumers in markets with fewer new entrants and greater concentration, consumers can face higher prices-as seen in the health care sector. The evidence shows that noncompete clauses also hinder innovation and business dynamism in multiple ways-from preventing would-be entrepreneurs from forming competing businesses, to inhibiting workers from bringing innovative ideas to new companies. “The proposed rule would ensure that employers can’t exploit their outsized bargaining power to limit workers’ opportunities and stifle competition.” “Research shows that employers’ use of noncompetes to restrict workers’ mobility significantly suppresses workers’ wages-even for those not subject to noncompetes, or subject to noncompetes that are unenforceable under state law," said Elizabeth Wilkins, Director of the Office of Policy Planning. labor markets by blocking workers from pursuing better opportunities and by preventing employers from hiring the best available talent. In many cases, employers use their outsized bargaining power to coerce workers into signing these contracts. By ending this practice, the FTC’s proposed rule would promote greater dynamism, innovation, and healthy competition.”Ĭompanies use noncompetes for workers across industries and job levels, from hairstylists and warehouse workers to doctors and business executives. “Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand. “The freedom to change jobs is core to economic liberty and to a competitive, thriving economy,” said Chair Lina M. The FTC is seeking public comment on the proposed rule, which is based on a preliminary finding that noncompetes constitute an unfair method of competition and therefore violate Section 5 of the Federal Trade Commission Act. By stopping this practice, the agency estimates that the new proposed rule could increase wages by nearly $300 billion per year and expand career opportunities for about 30 million Americans. The Federal Trade Commission proposed a new rule that would ban employers from imposing noncompetes on their workers, a widespread and often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses. About the FTC Show/hide About the FTC menu items.News and Events Show/hide News and Events menu items. Advice and Guidance Show/hide Advice and Guidance menu items.Competition and Consumer Protection Guidance Documents.Enforcement Show/hide Enforcement menu items.
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