U.S. Moves to Bar Noncompete Agreements
The FTC is examining whether companies can limit their employees’ ability to work for a rival
In a far-reaching move that could raise wages and increase competition among businesses, the Federal Trade Commission (FTC) on Thursday unveiled a rule that would block companies from limiting their employees’ ability to work for a rival.
The proposed rule would ban provisions of labor contracts known as noncompete agreements, which prevent workers from leaving for a competitor or starting a competing business for months or years after their employment, often within a certain geographic area. The agreements have applied to workers as varied as sandwich makers, hairstylists, doctors and software engineers.
Studies show that noncompetes, which appear to directly affect roughly 20 percent to 45 percent of U.S. workers in the private sector, hold down pay because job switching is one of the more reliable ways of securing a raise. Many economists believe they help explain why pay for middle-income workers has stagnated in recent decades.
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