FTC Moves to Ban Noncompete Clauses, Unleashing Small Business Growth
Commission Votes to Protect Worker Mobility
Estimated 27 New Businesses Per Year to Emerge
Washington, D.C. – In a groundbreaking move, the Federal Trade Commission (FTC) has voted to issue a proposed final rule that would prohibit most employers from enforcing noncompete clauses in employment contracts. This landmark decision aims to enhance worker mobility and foster small business formation.
The FTC's new rule deems it illegal for employers to enter into or attempt to enforce noncompete agreements with workers. These clauses often prevent employees from competing with their former employers after leaving the company. The FTC estimates that this ban could lead to a significant increase in new business formation, with the creation of an estimated 27 new businesses each year.
"Noncompete clauses stifle competition and limit economic opportunities for workers," said FTC Chair Lina Khan. "This rule will empower workers to pursue new ventures, innovate, and contribute to a more dynamic economy."
The rule exempts certain categories of workers, including those who have access to sensitive trade secrets or who are executives with substantial influence over the employer's business. However, for the majority of workers, the ban on noncompete agreements will provide greater freedom and flexibility.
The proposed final rule will now undergo a public comment period before it is finalized. The FTC anticipates that the ban on noncompete clauses will take effect one year after it becomes final.
This historic decision by the FTC marks a significant step towards promoting economic mobility and fostering a more competitive business landscape in the United States.
Comments