FTC Votes to Ban Noncompete Clauses, Chamber of Commerce Vows to Sue

The Federal Trade Commission voted to ban noncompete clauses.

For Context: Noncompete clauses are contractual agreements barring an employee from going to work for a competing company for a set period of time.

Details: The FTC board voted 3-2 in favor of banning noncompete clauses. These clauses are already banned in certain states, such as California, but this rule will ban them nationally and take effect in four months. The rule will prohibit employers from entering into new noncompete clauses or enforcing preexisting ones, apart from those pertaining to “senior executives.” The U.S. Chamber of Commerce announced its intention to sue the FTC, aiming to block the new rule.

Key Quotes: FTC Chair Lina Khan said in a statement after the vote, “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.” U.S. Chamber of Commerce President and CEO Suzanne P. Clark called the rule change “a blatant power grab that will undermine American businesses’ ability to remain competitive.”

How the Media Covered It: Fox Business (Lean Right bias) noted Republican opposition to the rule change, noting that critics argue the clauses are a “critical tool for companies to protect trade secrets and that they promote competitiveness.” The New York Times (Lean Left bias) noted that “Studies have shown that noncompetes suppress wages.”