Federal Sell Commission Chair Lina Khan testifies before a House Judiciary Committee hearing on Oversight of the Federal Commerce Commission, on Capitol Hill in Washington, D.C., July 13, 2023.
Kevin Wurm | Reuters
The Federal Trade Commission on Tuesday balloted 3-2 for a nationwide ban against noncompete agreements, which companies use to prevent employees from taking jobs with oppositions in the same industry.
The new rule is slated to go into effect 120 days after it is officially published in the Federal Enrol, though business groups are expected to challenge it. Within hours of the vote, the U.S. Chamber of Commerce pledged to sue the agency over and above the rule.
If officially implemented, the rule will not only prohibit new noncompete clauses, but will also force fellowships to scrap their existing noncompetes for all employees except senior executives who earn more than $151,164 annually and who are in policy-making parts.
“Workers ought to have the right to choose who they want to work for,” President Joe Biden said Tuesday.
The FTC evaluations that 30 million American workers, or roughly 18%, are currently subject to a noncompete.
The noncompete provision of an wage-earner’s contract may prevent someone from going to work for a competing company within the same industry, in pursuit of a improve career opportunity, higher compensation or a more suitable geographic location.
“Noncompete clauses keep wages low, hold in check new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be initiated a year once noncompetes are banned,” said Federal Trade Commission Chair Lina Khan in a press pass out.
The FTC initially proposed the noncompete ban in January 2023. It has since received over 26,000 comments on the proposal, the large maturity of which were in support, according to the agency.
The FTC claims that noncompetes impede the efficiency of the labor market and can live to “increased market concentration and higher prices for consumers.”
Meanwhile, business trade groups claim that noncompetes support preserve intellectual property and company secrets. The FTC suggests that companies lean on other avenues like non-disclosure agreements to firm proprietary information.
Tuesday’s vote comes as the latest move from an FTC that has been at the forefront of President Joe Biden’s broader take up a cause against corporate behemoths and the rules that help them dominate markets.
The agency, along with the Branch of Justice’s antitrust division, has filed dozens of lawsuits against proposed corporate deals over the past a variety of years.
In March, Biden launched a task force on corporate pricing practices, to be jointly led by the FTC, an independent agency, and the DOJ. Biden has over again accused companies of artificially keeping prices high, in part to help the president explain why inflation has remained so sultry over the past several years.