FTC Seeks Radical Overhaul of Non-compete Clauses

The Federal Trade Commission is aiming to make significant changes to work as it zeroes in on non-compete clauses in contracts. Such clauses are standard in many industries, and can have punishing effects on workers, such as those working in TV broadcasting, as a recent New York Times piece reveals. 

The FTC is concerned that non-compete clauses are stifling industry and hampering workers’ ability to make a fair wage. According to the research carried out by the commission, the new rules could result in an increase of $300 billion in wages. It would also allow workers more flexibility in their ability to change employers without having to sacrifice their careers in a given industry. As the Times piece points out, in broadcasting for example, restrictive non-compete rules force those working in broadcasting to wait at least a year before re-entering the industry.

These changes have been years in the making. Some states already have bans on non-compete clauses on the books, although some states routinely fail to enforce these rules. In 2021, the Biden administration urged the FTC to ban non-competes as part of a wide-ranging executive order.

The FTC is welcoming public comment until April 19 on the proposed rule change. We will continue to watch the FTC’s actions as they have an impact on many of our client’s contracts.