FTC Proposes Ban of Noncompete Clauses

February 27, 2023

On January 5, 2023, the Federal Trade Commission (“FTC”) proposed banning noncompete clauses in employee contracts. According to the FTC, this change could strengthen employees’ negotiating powers and could increase wages in the United States by nearly $300 billion.

A study conducted in 2015 by the Journal of Law and Economics found that out of 11,000 workers, one third of them found out about their noncompete clause after they already accepted the position. The study also found that only 10% of employees negotiated the clause with the other 90% assuming it was nonnegotiable or likely to cause issues with their employer.

The FTC believes noncompete clauses violate fair trade laws and need to be abolished. It argues that eliminating noncompete clauses would allow employees greater economic liberty and the opportunity to excel at another company with higher wages and better working conditions.

On the other hand, the U.S. Chamber of Commerce has announced its intention to sue to stop the FTC from implementing the ban. Sean Heather, U.S Chamber senior vice president, stated “When appropriately used, noncompete agreements are an important tool in fostering innovation and preserving competition.”

If you have question or concerns regarding the proposed ban on noncompete clauses, please contact the qualified attorneys at Rock Fusco & Connelly.