FTC Issues Rule Banning Noncompete Agreements in 3-2 Vote

On April 23, 2024, the Federal Trade Commission (FTC) voted to ban noncompete agreements.

What are Noncompete Agreements?

Noncompete agreements – also known as restrictive covenants – are contracts designed to prevent workers from leaving their current employer to work immediately for a competitor, usually by establishing a set amount of time that the employee must wait before beginning work for said competitor.

Why is the FTC Banning Noncompete Agreements?

With this move, the FTC hopes to raise wages and add new, quality jobs by creating more competition for talent among employers. Roughly 30 million people – about 20 percent of the US population – are subject to noncompete agreements. The proposal was approved with a 3-2 vote.

Although the final rule banning noncompetes is a significant action taken to protect employees, it is far from an unexpected move. Banning noncompetes has been a growing trend in recent years, especially in more progressive jurisdictions.

U.S. Chamber of Commerce Leads Charge in Lawsuit Against FTC Rule

The decision, which was expected to be followed by a series of lawsuits, has already been challenged by the Chamber of Commerce, the nation’s largest business lobby. They are joined by a growing number of employers arguing that noncompetes serve an important purpose in protecting an employer’s investment in employees, as well as proprietary information and intellectual property.

GovDocs is monitoring further developments to this story.

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This Employment Law News blog is intended for market awareness only, it is not to be used for legal advice or counsel.