U.S. Moves to Bar Noncompete Agreements in Labor Contracts - The New York Times
▻https://www.nytimes.com/2023/01/05/business/economy/ftc-noncompete.html
A sweeping proposal by the Federal Trade Commission would block companies from limiting their employees’ ability to work for a rival.
The exterior of the Federal Trade Commission’s headquarters in Washington, D.C.
The F.T.C. said a ban on noncompete clauses could increase wages by nearly $300 billion a year across the economy.Credit...Stefani Reynolds for The New York Times
Noam Scheiber
By Noam Scheiber
Jan. 5, 2023
In a far-reaching move that could raise wages and increase competition among businesses, the Federal Trade Commission on Thursday unveiled a rule that would block companies from limiting their employees’ ability to work for a rival.
The proposed rule would ban provisions of labor contracts known as noncompete agreements, which prevent workers from leaving for a competitor or starting a competing business for months or years after their employment, often within a certain geographic area. The agreements have applied to workers as varied as sandwich makers, hairstylists, doctors and software engineers.
Studies show that noncompetes, which appear to directly affect roughly 20 percent to 45 percent of U.S. workers in the private sector, hold down pay because job switching is one of the more reliable ways of securing a raise. Many economists believe they help explain why pay for middle-income workers has stagnated in recent decades.
Other studies show that noncompetes protect established companies from start-ups, reducing competition within industries. The arrangements may also harm productivity by making it hard for companies to hire workers who best fit their needs.
The F.T.C. proposal is the latest in a series of aggressive and sometimes unorthodox moves to rein in the power of large companies under the agency’s chair, Lina Khan.
President Biden hailed the proposal on Thursday, saying that noncompete clauses “are designed simply to lower people’s wages.”
“These agreements block millions of retail workers, construction workers and other working folks from taking a better job, getting better pay and benefits, in the same field,” he said at a cabinet meeting.