Lina Khan (Federal Trade Commission Chair) stated that non-compete clauses restrict workers’ ability to pursue better wages and employment opportunities, as well as start their own business. License Photo
Jan. 5 (UPI) — Federal Trade Commission plans to ban non-compete clauses. This will give employees greater flexibility in changing their jobs and starting their own businesses.
On Thursday, the commission issued a ruling that bans all employers from using noncompete clauses. The commission estimates that the implementation of a ban could increase workforce earnings by $300 billion annually.
Chair Lina Khan stated in a statement that “the freedom to move jobs is key to economic liberty” and to a competitive, flourishing economy.
Noncompetes prevent workers from switching between jobs freely, resulting in lower wages, better working conditions and a dearth of talent for businesses that need it to grow and develop. The FTC proposed rule to end this practice would encourage more innovation and dynamism as well as healthy competition.
According to the FTC, non-compete agreements are often exploitative and suppress wages. They can also hinder innovation because they lock employees in a job rather than giving them the freedom to create their own business.
Industries often use non-compete clauses to prevent employers from joining a rival. FTC proposed rule will not affect non-disclosure agreement, which protect trade secrets of an organization.
The rule, if implemented would be applicable to both independent contractors and employers that pay or not. Non-compete agreements that are in breach of the rule will have to be canceled.
Elizabeth Wilkins (director of the Office of Policy Planning) stated that research shows employers using noncompetes restrict worker mobility and significantly reduce workers’ wages.
The rule proposed would prevent employers from using their enormous bargaining power in order to restrict workers’ options and suppress competition.