Noncompete Agreements: FTC Ban Under Attack

Are Noncompetes Legal?

In April 2023, the Federal Trade Commission (FTC) voted to ban employers nationwide from entering into new noncompete agreements with their employees.

Noncompete agreements are contracts that restrict employees from working for competing businesses within a certain geographic area or for a certain period of time after leaving their current job.

FTC's Reasoning

The FTC argued that noncompete agreements are anti-competitive and harm workers by limiting their ability to find new jobs and earn a living.

The FTC also cited a study that found that noncompete agreements reduce wages by an average of 18% for workers who are subject to them.

Legal Challenges to FTC Ban

At least three companies have sued the FTC after it voted to ban noncompete agreements.

The companies argue that the FTC overstepped its authority and that noncompete agreements are necessary to protect employers' legitimate business interests.

The legal challenges to the FTC's ban are still pending.

Congressional Intent

Congress intended for the FTC to take action to prevent unfair competition.

Some argue that the FTC's ban on noncompete agreements is a reasonable exercise of its authority under this mandate.

Others argue that the FTC has overreached and that noncompete agreements are not necessarily anti-competitive.

Impact on Workers

The FTC estimates that roughly 30 million people, or 1 in 5 workers, are subject to noncompete agreements.

The FTC's ban could have a significant impact on these workers by allowing them to more easily find new jobs and earn a living.

Conclusion

The FTC's ban on noncompete agreements is a major development in labor law.

The legal challenges to the ban are still pending, but the FTC's action could have a significant impact on workers and businesses nationwide.

Only time will tell how the courts will rule on the FTC's ban and what the long-term impact will be on noncompete agreements.