The FTC is also looking to ban other types of employment provisions under the rule that have the same effect as non-competes. This may include requirements to reimburse training expenses if an employee leaves the company within a certain time period.

The FTC’s proposal would extend to nearly all work arrangements, including unpaid or volunteer positions, interns and independent contractors, in addition to regular employees.

The proposal fulfills a key pillar of President Joe Biden’s competition policy agenda from last year. In a massive executive order beginning July 2021, the White House directed the entirety of the federal government to prioritize actions related to competition policy and enforcement, particularly in labor markets. This notably included an attempt by the FTC to create a rule on non-competitive clauses.

In a statement, the agency said non-compete is a “widespread and often exploitative practice that suppresses wages, stifles innovation and prevents entrepreneurs from starting new businesses.”

The FTC estimates that banning the practice could put nearly $300 billion back into workers’ pockets each year, as well as boost career opportunities for nearly 30 million Americans.

“It’s an individual problem for one worker, but it’s an overall problem for the economy,” FTC Chair Leena Khan told reporters on Wednesday’s call.

In written statements, khan And Commissioner Rebecca Kelly Slaughterhighlighted the effect of non-competition not only on wages but also on innovation and new business creation.

“This in turn lowers product quality while raising prices,” Khan wrote, adding that in the health care sector alone, banning non-competition could reduce consumer prices by up to $150 billion each year. .

FTC commissioners voted 3-1 along partisan lines to issue the resolution, with the agency’s lone Republican commissioner, Christine Wilson, not voting.

In a written statement, Wilson said that his fellow commissioners were “departing from hundreds of years of legal precedent that conduct fact-specific tests of whether a non-compete clause is unfair,” and instead focused on the practice. There is a proposal to impose an almost complete ban. , Wilson also questioned whether the agency has the constitutional authority to issue the rule, and said that a recent U.S. Supreme Court opinion limiting the Environmental Protection Agency’s authority dooms the FTC’s efforts on non-competitors.

The US Chamber of Commerce also criticized the proposal, saying that the agency does not have the authority to issue rules and that it ignores the benefits of the exercise.

“An attempt to ban non-compete clauses in all employment circumstances overturns well-established state laws that have long governed their use and ignores the fact that, when used appropriately, non-competitive agreements are an important tool in fostering innovation and preserving competition,” said Sean Heather, U.S. the Chamber of Commerce’s Senior Vice President for International Regulatory Affairs and Antitrust said in a statement.

According to the other three commissioners, in many cases, employers take advantage of their excessive bargaining power to force employees to sign these contracts, such as by making it a condition of them receiving severance pay or part of the employment agreement.

“For too long, coercive non-compete agreements have denied millions of working people the freedom to change jobs, negotiate better pay, and start new businesses,” Sarah Miller, head of the antimonopoly group American Economic Liberties Project, said in a statement. Is done.” ,

Khan said one reason for creating the rule was the growing use of non-compete agreements among a broad segment of the American workforce in recent decades.

“These are no longer just used in boardrooms, but are now basically spread across the economy,” she said.

Khan said the FTC estimates that about one in five workers are subject to noncompetes.

in a tweetSen Ron Wyden (D-Ore.), who chairs the Senate Finance Committee, said, “The non-compete clause is anti-worker and anti-American, plain and simple. I’m glad [FTC] Moving forward to end this practice and level the playing field for American workers.”

As a precursor, on Wednesday the FTC announced enforcement action against two glass companies and a pair of related security firms over non-competitors’ use.

States including California, North Dakota and Oklahoma, as well as the District of Columbia, have already outlawed the use of non-compete agreements, and other states restrict their use among certain groups of workers.

The process for writing and implementing the rules can be lengthy, and involves public comments and potential legal challenges. A final rule probably won’t go into effect until at least 2024. The FTC will open the proposal to public comments for two months and the rule will go into effect six months after the final version is published.

The FTC frequently uses its rulemaking authority to implement its consumer protection mandate, including recently proposed rules governing privacy and data protection practices. However, the last time the agency issued a competition rule was in 1967, which regulated “discriminatory practices in the men’s and boys’ tailored clothing industry.” The rule was never implemented and was repealed in 1994.,

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