New FTC Rule Bans Employers From Restricting Workers
Final Rule Provides Broad Protection for Employees
Effective April 23, 2024
Washington, D.C. – The Federal Trade Commission (FTC) has issued a final rule that will ban for-profit US employers nationwide from using noncompete clauses. The rule, which goes into effect on April 23, 2024, is intended to protect workers from being unfairly restricted in their ability to find new employment.
According to the FTC, non-compete clauses cover roughly one-in-five American employees, or about 30 million workers. These clauses typically prevent employees from working for a competitor or starting their own business in the same industry for a period of time after leaving their current job.
The FTC found that non-compete clauses can have a number of negative consequences for workers, including:
- Reduced wages and benefits
- Limited job opportunities
- Suppressed innovation
- Increased economic inequality
The FTC's final rule will prohibit employers from using non-compete clauses with all employees, except in very limited circumstances. These circumstances include:
- Protecting trade secrets
- Preventing employees from divulging confidential information
- Protecting an employer's legitimate business interests
In addition, the final rule requires employers to provide employees with a written notice of their non-compete rights before the employee signs an employment contract.
The FTC's final rule is a significant victory for workers' rights. It will help to ensure that workers are free to pursue new opportunities and earn a fair wage.
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