FTC proposes rule on non-compete clauses

Jan 5, 2023 - by Marc Middleton

The Federal Trade Commission proposed a rule earlier today that would ban American employers from imposing non-compete clauses on workers, according to The Associated Press. The sweeping measure could make it easier for people to switch jobs and deepen competition for labor across a wide range of industries.

The proposed rule would prevent employers from imposing contract clauses that prohibit their employees from joining a competitor, typically for a period of time, after they leave the company.

WWE’s non-compete clauses usually run for 90 days on the main roster, and as little as 30 days in WWE NXT.

The proposed FTC rule would require companies to scrap existing non-compete causes and actively inform workers that they are no longer in effect, as well as prohibiting the imposition of new ones. The proposal is based on a preliminary finding that non-compete clauses quash competition in violation of Section 5 of the Federal Trade Commission Act. It would not generally apply to other types of employment restrictions, like non-disclosure agreements. The FTC estimates that the new rule could boost wages by nearly $300 billion a year and expand career opportunities for about 30 million Americans.

President Joe Biden addressed the proposed rule during a Cabinet meeting and called the FTC action “a huge step forward in banning non-compete agreements that are designed simply to lower people’s wages.” He added, “These agreements block millions of retail workers, construction workers and other working folks from taking better jobs and getting better pay and benefits in the same field.”

Advocates of the new rule argue that non-compete agreements contribute to wage stagnation because one of the most effective ways to secure higher pay is to switch companies. They argue that the non-compete clauses have become so commonplace that they have swept up even low-wage workers. Opponents of the proposed rule argue that by facilitating retention, non-compete clauses have encouraged companies to promote workers and invest in training them, especially in a tight labor market.

The American public has 60 days to submit commentary on the rule before it takes effect.

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