'Noncompete' agreements for most employees would be barred under new federal rule

by CHRISTOPHER RUGABER | AP Economics WriterFILE - The Federal Trade Commission building is seen, Jan. 28, 2015, in Washington. U.S. companies would no longer be able to bar employees from taking jobs with competitors under a rule approved by the FTC on Tuesday, April 23, 2024, though the rule seems sure to be challenged in court. U.S.

When it proposed the ban in January 2023, FTC officials asserted that noncompete agreements harm workers by reducing their ability to switch jobs for higher pay, a step that often provides most workers with their biggest pay increases. By reducing overall churn in the job market, the agency argued, the measures also disadvantage workers who aren't covered by them because fewer jobs become available as fewer people leave their positions.

“It’ll represent a sea change,” said Amanda Sonneborn, a partner at King & Spalding in Chicago who represents employers that use noncompetes. “They don’t want somebody to go to a competitor and take their customer list or take their information about their business strategy to that competitor.” Two Republican appointees to the FTC, Melissa Holyoak and Andrew Ferguson, voted against the proposal. They asserted that the agency was exceeding its authority by approving such a sweeping rule.

“The birth of so many important foundational companies could not have happened, at least not in the same way or on the same timeline and definitely not in the same place, had it not been for the ability of entrepreneurs to spin out, start their own companies, or go to a better company,” Lettieri said.

FTC Workers Federal Rule Employers Job Market Legal Challenges Economic Impact

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