Washington – The US Federal Trade Commission (FTC) presented on Thursday a proposal for a new regulation to prohibit companies from making their workers sign non-competition clauses.
This legal figure prevents workers from “freely changing jobs, depriving them of higher wages, better working conditions” while preventing companies from “accessing the talent they need to expand,” wrote the director of the FTC, Lina Khan, in a statement.
By signing a non-compete clause with a company, a worker agrees not to work for or become a competitor for a set period of time.
The agreement thus restricts the ability of workers to work for a competing company in the future or start a business in the same field or industry.
The new rule would make it illegal for an employer to: sign, attempt to sign or maintain a non-compete clause with a worker, the commission explained.
It will also apply to those who are independent contractors or those who have unpaid jobs, while it will force companies to revoke contracts of this type that they already have in force.
The agency estimates that the rule will lead to a $300 billion increase in wages for Americans each year and expand job opportunities for some 30 million people.
President Joe Biden welcomed the FTC’s proposal, calling it a “big step forward,” according to US media.
However, the US Chamber of Commerce has already indicated that it does not see it favorably. “The FTC’s actions to ban non-compete clauses entirely are clearly illegal,” Chamber official Sean Heather was quoted as saying by The Washington Post.
The move stems from an executive order signed by President Biden in mid-2021, which ordered government agencies to prioritize labor competition policies and instructed the FTC to review non-compete clauses.