U.S. FTC Votes to Ban Non-Compete Agreements, Faces Legal Challenges
The U.S. Federal Trade Commission has approved a ban on non-compete agreements nationwide. Learn more about the decision and its impact on businesses and finance in the U.S.
- The Federal Trade Commission has approved a nationwide ban on non-compete agreements.
- The decision now faces legal challenges as bodies such as the Chamber of Commerce have sued the FTC.
The Federal Trade Commission (FTC) has voted to ban non-compete agreements across the U.S., which companies have used to stop employees from working for competitors in the same industry. The ban is expected to go into effect after 120 days, after which companies will not be able to create new non-compete agreements and even scrap existing agreements, except for employees at high-level posts.
According to the FTC, more than 30 million workers in America, who account for approximately 18% of the overall workforce, are currently subject to such agreements. According to the FTC, non-compete agreements hurt competition and market efficiency and contribute to inflation.
Such provisions essentially prevent workers from moving to competitor companies for reasons including location, pay, or career progression. In recent years, the FTC has also collaborated with the DoJ to stop a number of corporate deal proposals.
See More: TikTok One Step Closer To Getting Banned in the US After Senate Passes Bill
However, the FTC’s decision has not gone down well universally. Several business groups and the U.S. Chamber of Commerce have now sued the FTC over the ban, claiming that it does not have the required authority to make such a change and that the ban was much too wide in scope for implementation. The lawsuit claims that the ban also breaks longstanding state and federal laws.
Businesses also argue that non-compete agreements are a key safeguard against the theft of company secrets and intellectual property. The FTC has rejected these arguments, stating that companies could look to measures such as non-disclosure agreements to safeguard sensitive information.
If successfully implemented, a ban on non-competes could significantly impact operations, particularly in the finance sector, businesses such as big banks, hedge funds, brokers, cryptocurrency, and asset managers, notorious for strict non-compete clauses in employment contracts. Whether FTC’s efforts are successful in court remains to be seen.
What is your opinion on the validity of non-compete policies? Share your thoughts on LinkedIn, X, or Facebook. We’d love to hear from you!
Image source: Shutterstock
LATEST NEWS STORIES
