In a landmark decision set to reshape the American workforce, the Federal Trade Commission (FTC) has announced a new rule banning noncompete agreements nationwide. Passed by a narrow 3-2 vote, this rule will take effect 120 days after its publication in the Federal Register, the date of which has not yet been set. This new rule represents a significant shift in employment law.
What This Means for Workers and Employers
Approximately 30 million U.S. workers—20% of the current workforce—are estimated to be currently bound by noncompete clauses that limit their ability to switch jobs freely. These clauses often tether employees to workplaces they are eager to leave, sometimes at significant personal and professional costs. The FTC’s rule aims to free workers from these constraints, thereby enhancing their freedom to explore new opportunities and fostering broader economic innovation.
Exclusions and Implications
The rule includes several important exclusions, particularly for senior executives and owners with at least a 25% ownership interest. It also excludes noncompetes related to the sale of a business, without any threshold requirement.
Public Support and Legal Alternatives
The rule garnered substantial public support, with over 25,000 of the more than 26,000 comments received during the public consultation period favoring the ban. While this reflects widespread approval of the change, employers can still protect their proprietary information through trade secret laws and non-disclosure agreements. The enforcement of these protections, however, may present challenges.