The FTC banned noncompetes. What that means for workers and companies.

By Taylor Telford, The Washington PostLina Khan, then a nominee for Commissioner of the Federal Trade Commission, speaks during a hearing, April 21, 2021 in Washington. for most of the U.S. workforce, freeing an estimated 30 million people bound by contracts that limit their ability to change jobs within their industry or strike out on their own.

“These contracts and noncompetes were developed in the first place to prevent employees from easily switching to rival firms, or to new positions,” Michelle Hay, global chief people officer at the business solutions company Sedgwick, told The Post, adding that “noncompetes have been governed on a state-by-state basis for more than 200 years.”

Doing away with noncompetes would increase business formation across the country by 2.7 percent, or 8,500 additional businesses each year, the FTC projects. The regulator also expects that the final rule will increase earnings for the average worker by $524 per year and lower health-care costs by as much as $194 billion over the next decade.

“Noncompete clauses force employees to endure low wages and poor working conditions,” Zelnick said in comments emailed to The Washington Post. Emily Dickens, chief of staff and head of government affairs at the Society for Human Resource Management, said blanket bans on noncompete agreements “pose significant challenges for HR professionals tasked with safeguarding their employers’ intellectual property and preventing unfair competition.”

While some companies have concerns that a noncompete ban would make their trade secrets and other proprietary information vulnerable to exposure, most of them “also have nondisclosure agreements and confidentiality clauses, which should give them all the protection they need on that front,” Benton-Hayes said in comments emailed to The Post.

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U.S. Chamber of Commerce, business groups sue FTC over ban on noncompete clausesThe U.S. Chamber of Commerce has long threatened to sue the FTC over the noncompete ban.
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