The FTC voted to ban noncompete agreements

High-school football coaches will be happy – there’s about to be a whole lot more competing going on.

Yesterday, the Federal Trade Commission voted 3-2 for a nationwide ban against noncompete agreements, which prevent workers from taking positions with competitors for a period of time after they leave a job.

The impact: The rule bans new noncompete agreements across the nation, and breaks the proverbial chains of any workers currently bound by one – an estimated 30 million Americans, or ~18% of the workforce. However, there is one exception: senior execs who earn over $151,164 annually and are in policy-making roles.

The arguments: The FTC claims that noncompetes unfairly limit competition and worker mobility. When the agency first proposed the rule in January 2023, it estimated the measure would lead to ~8,500 new startups per year, and increase earnings by ~$300 billion each year.

• Business groups argue the ban will increase business costs, while also putting trade secrets into jeopardy.

Many states have already taken a similar action to the FTC. California, Minnesota, Oklahoma, and North Dakota currently ban noncompete agreements, while at least a dozen other states have passed laws limiting their use.

👀 Looking ahead… The federal noncompete ban is slated to go into effect In ~120 days, though it’s sure to be challenged in court prior to implementation. The US Chamber of Commerce has already said it plans to sue the FTC over the rule.