The Federal Trade Commission (FTC) voted. 3-2 Tuesday to ban non-compete agreements that prevent tens of millions of employees from working for competitors or starting a competing business after leaving a job.
From fast food workers to CEOs, the Federal Trade Commission estimates 18% of the US workforce Covered by non-compete agreements – about 30 million people.
The final rule would prohibit new non-compete agreements for all workers and require companies to let current and former employees know they will not enforce them. Companies would also have to get rid of existing non-compete agreements for most employees, although in a change from the original proposal, the agreements may remain in place for senior executives.
“It is deeply unfree and unfair for people to remain stuck in jobs they want to leave, not because they lack better alternatives, but because non-competition prevents another company from competing fairly for their labor, requiring workers instead to leave their industries or homes.” “. “To make ends meet,” FTC Commissioner Rebecca Slaughter (D) said in prepared remarks.
The new rule is scheduled to take effect within 120 days after its publication in the Federal Register. But its future is uncertain, as pro-business groups opposed to the rule are expected to take legal action to prevent its implementation.
Business groups say non-compete agreements are necessary to protect proprietary information and intellectual property, although the rule would not prohibit other ways to protect that information, including nondisclosure and confidentiality agreements. They also question the agency's authority to retroactively issue blanket bans.
Congress has not given the agency explicit authority to prohibit noncompetes, although several bipartisan bills have been introduced to reform noncompete agreements, including the Workforce Mobility Act sponsored by Senators Chris Murphy (D-Connecticut) and Todd Young (R-Indiana). . ), Tim Kaine (D-Va.) and Kevin Cramer (RN.D.), and the Freedom to Compete Act sponsored by Sens. Marco Rubio (R-Fla.) and Maggie Hassan (D.N.H.).
The U.S. Chamber of Commerce, the nation's largest pro-business lobbying group, said it would file a lawsuit to block the rule.
Chamber President and CEO Susan Clark called the FTC's vote to ban anticompetitive products “a blatant power grab that will undermine the ability of American companies to remain competitive.”
“This decision sets a dangerous precedent for government micromanagement and could harm employers, workers and our economy,” Clark said. “The Chamber will sue the FTC to block this unnecessary and illegal rule and alert other agencies that this overreach will not go unchecked.”
While dissenting commissioners said they do not support noncompete agreements, they do not believe the agency has the authority to issue the rule without explicit guidance from Congress.
“Starting with policy puts the cart before the horse,” said FTC Commissioner Andrew Ferguson (R). “No matter how important, clear, or controversial this issue is, and no matter how wise the administrative solution, an administrative agency's authority to regulate must always rest on congressional grants of authority. Because we lack that authority, the final rule is unlawful.”
The lawsuit will be the latest battle between the business community and President Biden's administration, as agencies including the Federal Trade Commission roll out measures to crack down on corporate price gouging, unwanted fees and alleged anti-competitive behavior. Last month, the chamber filed a lawsuit challenging a Consumer Financial Protection Bureau rule that caps credit card late fees at $8 for the largest issuers.
The Biden administration, Democrats and labor advocates have argued that non-compete agreements limit worker mobility, lower workers' wages and harm entrepreneurship and competition in the U.S. economy.
When the FTC first proposed the rule in January 2023, it estimated that the rule would increase profits by about $300 billion each year. About 25,000 of the 26,000 public comments the agency received support the proposal, with health care workers making up “a very large portion,” FTC Chairwoman Lina Khan told reporters Tuesday morning.
These political battles are taking place against the backdrop of the 2024 presidential election as Biden aims to differentiate himself from the presumptive Republican nominee, former President Trump.
Biden and Trump are neck and neck, according to national poll averages analyzed by The Hill and Decision Desk HQ. But the current president is trying to change negative perceptions about his handling of the economy, as voters say his predecessor handled the matter better.
Only 38% of voters surveyed rated the economy as good under Biden compared to 65% who said it was good under Trump, according to the poll. CBS News poll Of the 2,159 U.S. adults released in March.
While inflation has fallen significantly from its peak of 9% in June 2022 to around 3% in recent months, rising prices are top of mind for many voters. The CBS News poll found that only 17% of voters surveyed believe Biden's policies will help lower prices, compared to 44% who believe Trump's will.
Updated at 3:41 PM EST
Copyright 2024 Nexstar Media Inc. all rights are save. This material may not be published, broadcast, rewritten or redistributed.
“Devoted student. Bacon advocate. Beer scholar. Troublemaker. Falls down a lot. Typical coffee enthusiast.”