The US Federal Trade Commission (FTC) has proposed a new rule that would ban non-compete agreements and clauses from contracts in the U.S. The motivation is to create more competition and innovation by allowing employees to change jobs freely, without being restricted by non-compete clauses. The rule would apply to both independent contractors and full-time employees, paid or unpaid. It would also require all employers to rescind all existing non-competes.
The proposal was released on January 5th, 2023, and a 60-day public comment period has ended. Many businesses are opposing the rule. It’s estimated that 30 million companies’ workforces or 18% of the U.S. employees are required to sign non-competes before starting a job.
If adopted, the FTC has authority to file complaints against rule violators, and recommend “cease and desist orders” from administrative law judges (ALJ). The FTC could change the proposal based on public comments received. It could take years before the proposal would become effective.
Learn more here.