Jan. 5 (UPI) — The Federal Trade Commission is mulling a ban on non-compete clauses, giving employees more flexibility when changing jobs or starting their own business.
The commission introduced a rule on Thursday that all but completely bans employers from using non-compete clauses. It estimates that by implementing a ban, the workforce may increase its earnings by $300 billion per year.
“The freedom to change jobs is core to economic liberty and to a competitive, thriving economy,” Chair Lina Khan said in a statement.
“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. By ending this practice, the FTC’s proposed rule would promote greater dynamism, innovation, and healthy competition.”
The FTC said non-competes are “often exploitative,” suppress wages and can hinder innovation by locking employees into a position rather than allowing them the ability to start their own businesses.
Non-compete clauses are often used in industries to stop employers from immediately joining a competitor. The FTC’s proposed rule would not impact non-disclosure agreements, which are used to protect an organization’s trade secrets.
If implemented, the rule would apply to independent contractors as well as paying and non-paying employers. Existing non-compete agreements in violation with the rule would have to be removed.
“Research shows that employers’ use of noncompetes to restrict workers’ mobility significantly suppresses workers’ wages-even for those not subject to noncompetes, or subject to non-competes that are unenforceable under state law,” said Elizabeth Wilkins, director of the Office of Policy Planning.
“The proposed rule would ensure that employers can’t exploit their outsized bargaining power to limit workers’ opportunities and stifle competition.”
