Dave Michaels wrote an article for the Wall Street Journal titled FTC Proposes Banning Noncompete Clauses for Workers (January 5, 2023).
« The Federal Trade Commission on Thursday issued a plan to ban noncompete clauses, a proposal that would allow workers to take jobs with rival companies or start competing businesses but raises the prospect of legal opposition from companies that say the practice has a legitimate purpose. »
« The FTC said noncompete clauses constitute an exploitative practice that undermines a 109-year-old law prohibiting unfair methods of competition. Noncompete clauses, which typically bar employees from joining a competitor for a period after they quit, affect nearly one in five American workers, according to the agency. Long associated with higher-paid managers, the clauses have also been imposed on lower-wage workers who lack access to trade secrets, strategic plans and other reasons that could be cited for hampering job switchers, the agency says. »
« If the FTC eventually votes to adopt the proposal, companies would have to rescind noncompete requirements they impose on workers and let employees know about the change. FTC officials say noncompetes suppress wages, restrain new business formation and hurt the ability of companies to hire workers they need to grow. »
« A handful of states, including California, say the clauses are unenforceable in employment contracts. »
« The rule could have a big impact in states such as Georgia, which amended its law in 2011 to give businesses more flexibility in using noncompetes. The state law generally allows two-year noncompetes for key employees, managers and other supervisors, sales personnel who negotiate with customers, and people who obtain orders or contracts for the company, said Neal Weinrich, an Atlanta attorney who focuses on noncompete agreements and trade secrets. »
« The FTC’s proposal includes one exception for noncompetes between buyers and sellers of companies. The restricted person would need to have owned at least 25% of the firm, according to the FTC’s plan. »
« On Wednesday, the FTC announced settlements with several companies that it said collectively required thousands of employees to sign noncompete agreements. The companies agreed to drop the provisions and stop enforcing them against any workers they accused of violating the rule. The FTC said one of the defendants, Prudential Security Inc. and Prudential Command Inc., required low-wage security guards to sign contracts that barred them for two years from working for a competing firm within a 100-mile radius of where they had been stationed for Prudential. The employees typically earned wages close to the minimum wage, but Prudential’s restrictions said they would have to pay a $100,000 fine if they violated the noncompete clause, the FTC said. »