FTC Votes to Bans Non-Compete Agreements & Clauses
| RADIO ONLINE | Wednesday, April 24, 2024 |
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 Federal Trade Commission |
The Federal Trade Commission (FTC) voted 3-2 to prohibit non-compete agreements on Tuesday. This decision, subject to ongoing legal challenges, will render existing non-compete clauses unenforceable for the vast majority of employees within 120 days. However, certain senior executives will still be covered by these existing agreements, although employers will be barred from initiating new contracts or imposing fresh restrictions on these employees.
FTC Chair Lina M. Khan commented, "Non-compete clauses not only suppress wages but also stifle innovation and deprive the American economy of dynamism, including from over 8,500 new startups that could emerge annually once such restrictions are removed."
The FTC's new rule aims to empower workers to seek new employment opportunities, launch businesses, or introduce innovative ideas to the market without constraints. According to the FTC's estimates, the abolishment of non-compete agreements is expected to increase new business creation by 2.7% annually, potentially leading to the formation of an additional 8,500 companies each year.
The FTC initially proposed the ban on non-compete agreements in January, 2023, which faced opposition from the National Association of Broadcasters (NAB) and some Congressional members. Despite this, the FTC received significant public support for the proposal, with over 26,000 comments submitted, 25,000 of which favored the ban.
