Crypto News: FTC Votes to Ban Noncompete Agreements in Employment Contracts

The FTC or Federal Trade Commission published a final regulation that would defend employees’ fundamental right to job mobility, increase creativity, and encourage the creation of new businesses by outlawing noncompetes on a national level.

FTC Bans Noncompete Agreements

The FTC has finally put a nationwide ban on noncompete agreements in the workspace. A non-compete agreement is a formal contract provision or legal agreement that states an employee is not permitted to compete with their employer following the conclusion of their employment.

“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.”

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FTC’s Previous Fight With Noncompete Agreements

The Federal Trade Commission (FTC) first proposed this rule in January 2023, receiving support from a large number of employees. The FTC estimates that the ban will raise worker wages by up to $488 billion over the next ten years, with an average worker’s earnings rising by an estimated $524 annually.

Additionally, the decision may impact up to 30 million Americans, or roughly one in five workers, in jobs ranging from minimum wage to executive. The rule is expected to go into effect in 180 days, but this date may be postponed because the U.S. Chamber of Commerce plans to sue the FTC.

According to the FTC’s projections, the final rule prohibiting noncompetes will cause the number of new firms to expand by 2.7% per year, resulting in the creation of over 8,500 new businesses annually. The final regulation is anticipated to reduce healthcare costs by up to $194 billion over the next ten years, and it is anticipated to increase worker wages, with an additional $524 in earnings forecast for the average worker annually.

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