US Regulator Votes to Ban Most Non-Compete Clauses

In a major victory for prospective employees looking down the barrel of a non-compete clause, the US Federal Trade Commission voted Tuesday to adopt a near-total ban on such provisions, which limit the ability of workers to switch jobs within an industry. The landmark decision comes three years after President Joe Biden signed an executive order encouraging the FTC to limit the employer-friendly restrictions, which constrain roughly one in five Americans. The agency’s three Democrats voted to strike down non-compete clauses while its two Republicans voted to keep them.

The ruling bans most new non-competes and means the bulk of existing restrictions would become unenforceable. The agency vote also bars non-competes for most senior executives, though existing limits on those who earn more than $151,164 a year in a “policy making position” can remain. The FTC estimated its decision would increase US employee earnings by at least $400 billion over the next 10 years. “Robbing people of their economic liberty also robs them of all sorts of other freedoms,” FTC Chair Lina Khan said. But while American workers may rejoice now, it’s not over yet. The ruling doesn’t take effect for six months, and business lobbyists vowed to challenge it in court. It’s a case that could eventually reach a Republican-appointee dominated Supreme Court that has made its views known when it comes to such agency action.