Lina Khan, chair of the Federal Trade Commission, has made some big moves since taking over the commission. Photo: Ting Shen/Bloomberg via Getty Images (Getty Images)
Non-compete
clauses
are
a
thing
of
the
past
thanks
to
a
new
ruling
from
the
Federal
Trade
Commission
(FTC).
The FTC issued a rule to ban non-compete clauses for employees, according to a release from the commission on Tuesday. It first proposed the rule to get rid of the practice last year.
“Non-compete 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 non-competes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”
With the new rule, existing noncompetes for employees will not be enforceable after the effective date, which is 120 days after the rule has been published in the Federal Register. Senior-level executives, however, will still be subject to the non-compete clause they may have signed, but the company can’t create a new non-compete or modify the current one.
The FTC says the banning of non-compete clauses will see the creation of more than 8,500 new businesses a year. It will also increase worker pay, lower healthcare costs, and lead to tens of thousands of new patents.
But don’t quit your job just yet. The U.S. Chamber of Commerce, the business lobbying group and not the Department of Commerce, says it’s going to sue the FTC over this “unnecessary and unlawful rule.”
“This decision sets a dangerous precedent for government micromanagement of business and can harm employers, workers, and our economy,” the organization said in a press release Tuesday.
Non-compete clauses are common when it comes to tech—not only as a means to prevent competitors from poaching talent but also as a means for the company to protect its intellectual property. And now they’re dead.
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