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Should workers be free to jump ship?

The Federal Trade Commission (FTC) issued a rule banning for-profit American employers from requiring employees to sign agreements with non-compete clauses on Tuesday, April 23, 2024.  

The FTC is cracking down on ‘non-compete agreements’, contracts that employers use to prevent their workers from changing jobs even if that job will pay slightly higher wages or provide better working conditions. President Joe Biden soon after announced that workers should have the right to choose their employers.

The FTC estimates that non-compete clauses effectively bind about 30 million US workers in their current jobs. These clauses impede workers from changing jobs, leading to lower compensation, non-ideal working conditions, stifle innovation, prevent enterprising individuals from starting their businesses, and ultimately, undermine fair competition in the labor market.

Some highlights to know about the final rule on the ban on non-compete clauses for most workers are as follows:

  1. The FTC’s final rule bans for-profit employers from issuing new non-compete clauses to any worker.
  2. The ban becomes effective 120 days after publication in the Federal Register. Existing non-compete agreements will only be unenforceable after the rule’s effective date.
  3. The rule, however, allows existing noncompete agreements for Senior Executives to remain in force. FTC defines Senior Executives as workers who earn more than $151,164 annually and hold a ‘policy-making position’.
  4. The final rule encourages businesses to protect their trade secrets and other confidential information with confidentiality clauses.
  5. The FTC ban shall apply nationwide and will override state laws regarding noncompete clauses for most workers.

Did you love this news article? Then, answer this poll:

Should the Federal Trade Commission (FTC) ban non-compete agreements for employees?

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