New ruling by FTC regarding NonCompetes:
4.23.24 Post shared on LinkedIn today from a CBS report regarding the FTC's rule on NonCompetes: Federal regulators on Tuesday enacted a nationwide ban on new noncompete agreements, which keep millions of Americans — from minimum-wage earners to CEOs — from changing jobs within their industries. The Federal Trade Commission on Tuesday afternoon voted 3-to-2 to approve the new rule, which will ban noncompetes for all workers when the regulations take effect in 120 days. For senior executives, existing noncompetes can remain in force. For all other employees, existing noncompetes are not enforceable. The antitrust and consumer protection agency heard from thousands of people who said they had been harmed by noncompetes, illustrating how the agreements are "robbing people of their economic liberty," FTC Chair Lina Khan said. The FTC commissioners voted along party lines, with its two Republicans arguing the agency lacked the jurisdiction to enact the rule and that such moves should be made in Congress. "The freedom to change jobs is core to economic liberty and to a competitive, thriving economy," Khan said in a statement making the case for axing noncompetes. "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." A threat to trade secrets? An estimated 30 million people — or one in five U.S. workers — are bound by noncompete restrictions, according to the FTC. The new rule could boost worker wages by a total of nearly $300 billion a year, according to the agency. Employers who use noncompetes argue that they are needed to protect trade secrets or other confidential information employees might learn in the course of their jobs. But corporations concerned about protecting their intellectual assets can use restraints such as confidentiality agreements and trade secret laws, and don't need to resort to noncompete agreements, the FTC staff determined. The commission's final rule does not nullify existing noncompetes with senior executives, who are defined as those earning more than $151,164 a year and who hold a policy-making position. Those execs are much more likely to negotiate the terms of their compensation, according to regulators. Still, the FTC is banning new noncompetes for senior executives on the grounds that the agreements stifle competition and discourage employees from creating new businesses, potentially harming consumers. The idea of using noncompetes to keep business information out of the hands of rivals has proliferated, noted Shierholz, citing a notorious case involving Jimmy John's eateries. Low-paid workers are now the hardest hit by restrictive work agreements, which can forbid employees including janitors, security guards and phlebotomists from leaving their job for better pay even though these entry-level workers are least likely to have access to trade secrets.