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Federal Trade Commission bans noncompete clauses for employees.

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On April 23, 2024, the Federal Trade Commission (FTC) issued a final rule ( that bans noncompete agreements. The FTC issued this new rule to promote competition and protect the fundamental freedom of workers to change jobs.

FTC Chair Lina M. Khan explained the purpose of this new rule is to increase innovation, protect workers from being stuck in jobs where they are undervalued and to foster new business formation. Further, “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 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.”

Noncompetes are a commonly used and often exploitative because they impose contractual limitations that prevent workers from taking a new job or starting a new business. Noncompetes can compel workers to stay in a job they want to leave or to bear other significant harms and costs, such as being forced to switch to a lower-paying field, being forced to relocate, being forced to leave the workforce altogether, or being forced to defend against expensive litigation. According to the FTC, an estimated 30 million workers—nearly one in five Americans—are subject to a noncompete.

Under the FTC’s new rule, existing noncompetes for the vast majority of workers will no longer be enforceable after the rule’s effective date (other than against senior executives). Additionally, employers are banned from entering into or attempting to enforce any new noncompetes. Employers will be required to provide notice to workers who are bound by an existing noncompete that they will not be enforcing any noncompetes against them. The final rule’s expected effective date is September 4, 2024.