U.S. Moves to Bar Noncompete Agreements in Labor Contracts

Super interesting article in the New York Times about a new proposed rule that would ban noncompete agreements in employment contracts.

https://www.nytimes.com/2023/01/05/business/economy/ftc-noncompete.html

“Studies show that noncompetes, which appear to directly affect roughly 20 percent to 45 percent of private-sector U.S. workers, hold down pay because job switching is one of the more reliable ways of securing a raise. Many economists believe they help explain why pay for middle-income workers has stagnated in recent decades.

Other studies show that noncompetes protect established companies from start-ups, reducing competition within industries. The arrangements may also harm productivity by making it hard for companies to hire workers who best fit their needs.”

“Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand,” Ms. Lina Khan, FTC Chair, said in a statement announcing the proposal. “By ending this practice, the F.T.C.’s proposed rule would promote greater dynamism, innovation and healthy competition.”

“The commission’s proposal appears to address this issue by requiring employers to withdraw existing noncompetes and to inform workers that they no longer apply. The proposal would also make it illegal for an employer to enter into a noncompete with a worker or to try to do so, or to suggest that a worker is bound by a noncompete when he or she is not.”

“The proposal covers not just employees but independent contractors, interns, volunteers and other workers.”