Why the FTC’s Ban on Noncompetes Is a Win for Workers

Companies are no longer allowed to use noncompete agreements to prevent workers from joining rival organizations after the Federal Trade Commission (FTC) banned noncompete agreements for all workers except senior executives this week.

The FTC believes this rule will lead to higher wages, more innovation, and thousands of new businesses across the U.S. It is set to go into effect within 120 days of being published in the Federal Register.

What’s the Deal With Noncompetes?

Noncompete agreements are contracts restricting workers from taking a job with companies that compete with their current employers. They usually outline a period of time during which the individual can’t work for a competitor.

They are particularly common among senior executives, as well as in certain industries, such as finance, and companies may argue that these agreements protect their business and intellectual property. But for many workers, they may simply discourage job switching, robbing employees of their flexibility and the pursuit of higher wages and better benefits.

Several states had already banned noncompete clauses, and companies often don’t enforce them.

Looking Forward

Without noncompete agreements, workers would be free to explore the job market or even start their own company within their area of expertise. The ban could provide more flexibility and opportunities to nonunion employees across the country.

But the noncompete ban has already faced pushback. Critics argue that the FTC has overstepped, and point out that the bill could give certain entities exempt from FTC regulation — such as banks, credit unions, and healthcare nonprofits — a competitive advantage over other businesses in their sectors. A pair of lawsuits by the Chamber of Commerce and Texas accounting firm Ryan challenge the ban’s constitutionality.

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