The Federal Trade Commission (FTC) recently issued a new rule that will ban noncompete agreements nationwide.
On April 23, 2024, the FTC issued a final rule to ban noncompete clauses, a move that officials say will protect workers and generate thousands of new businesses each year.
The rule will impact 30 million Americans who are currently subject to a noncompete agreement with their employer, including many workers in the trucking industry.
The FTC defines a noncompete as “a contractual term between an employer and a worker that blocks the worker from working for a competing employer, or starting a competing business, typically within a certain geographic area and period of time after the worker’s employment ends.”
Once the final rule goes into effect, most existing noncompetes will be unenforceable, the FTC says. Existing noncompetes for senior executives earning more than $151,164 annually and who are in policy-making positions can remain in place under the new rule.
The FTC estimates that banning noncompetes will result in additional earnings of $524 per year for the average worker. The agency also says that the rule will result in more than 8,500 additional new businesses created each year.
“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” said FTC Chair Lina M. Khan. “The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”
The final rule will go into effect 120 days following publication in the Federal Register.
The rule does face multiple legal challenges, including a lawsuit filed by the U.S. Chamber of Commerce.