The FTC (Federal Trade Commission) has issued a final rule aimed at upholding workers’ right to change jobs, boost innovation, and foster the growth of new companies by banning non-compete agreements nationwide.
FTC Bans Noncompete Agreements
The FTC has made it illegal for employers to enforce non-compete agreements across the country. A non-compete agreement is a clause in a contract or a separate legal agreement that prevents an ex-employee from working in the same line of business as their previous employer after leaving the company.
“FTC Chair Lina M. Khan argued that noncompete clauses restrict wages growth, stifle innovation, and deprive the US economy of its vibrancy, which would include over 8,500 annual startup foundings if such clauses were abolished. The FTC’s decision to prohibit noncompetes will enable Americans to switch jobs, start businesses, or introduce new concepts without hindrance.”
FTC’s Previous Fight With Noncompete Agreements
In early 2023, the Federal Trade Commission (FTC) suggested a new rule and gained significant backing from many employees. According to the FTC’s predictions, this ban could boost worker wages by as much as $488 billion over the next decade, equating to an average annual income increase of approximately $524 for each employee.
Further, the proposed decision could affect around 30 million Americans, which is approximately one out of every five workers, across various job types from minimum wage earners to executives. The implementation timeline for this rule is estimated to be within the next 180 days; however, it’s possible that this deadline may be pushed back due to legal action planned by the U.S. Chamber of Commerce against the FTC.
Based on the FTC’s estimates, the implementation of the ban on noncompetes is projected to lead to a 2.7% yearly growth in new businesses, resulting in approximately 8,500 new companies formed each year. This regulation is expected to bring about healthcare cost savings of up to $194 billion over the next decade, and it is predicted to boost worker wages, with an estimated $524 in annual earnings for the average worker.
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2024-04-24 03:47