The FTC Proposes Banning Noncompete Agreements

The Federal Trade Commission on Thursday proposed banning employers from requiring employees to sign noncompete agreements, which prevent workers from taking positions at competitors for a period of time after they leave a job.

This would be a big change in the business world, where the agreements are widely used. The FTC estimates that 30 million people, or one in five workers, would be impacted, and the rule could increase wages by nearly $300 billion a year.

The proposal comes more than a year after the Biden administration issued an order directing the agency to curb the use of noncompetes in order to increase competition across the economy.

Noncompetes were once used mainly to keep high-paid executives from jumping ship to rivals and taking their insider knowledge with them. But they have become more common, with even low-wage workers subject to these restrictions.

The FTC's new proposal would make it illegal for an employer to enter into a noncompete with a worker, and would require companies to rescind existing agreements.