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FTC Proposes Rule Banning Companies from Imposing Non-Compete Clauses on American Workers

The Federal Trade Commission (FTC) is proposing a rule that would ban companies from imposing non-compete clauses on workers in the United States, a move that the agency suggests would increase worker earnings by nearly $300 billion annually.

The FTC, chaired by Lina Khan, proposed the rule as some 30 million Americans in the workforce are estimated to be beholden to non-compete clauses in their employment contracts. The clauses prevent them from working for a competing employer or starting a competing business.

“Because non-compete clauses prevent workers from leaving jobs and decrease competition for workers, they lower wages for both workers who are subject to them as well as workers who are not,” the FTC writes in its proposed rule.

The rule would effectively ban U.S. employers from imposing such non-compete clauses on their employees — a move that would score higher wages for American workers and generate more labor market competition — and rescind existing non-compete clauses.

“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,” Khan said in a statement. “By ending this practice, the FTC’s proposed rule would promote greater dynamism, innovation, and healthy competition.”

Economist Matt Stoller likened the proposed rule to a ban on “indentured servitude” in a Substack post.

“The government’s job is to ensure our liberty from coercion, in all its forms,” Stoller wrote. “And for the first time in a very long time, the Federal Trade Commission acted like it.”

 

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