US regulator proposes to ban non-compete clauses with workers

The Federal Trade Commission, a US regulator, on Thursday proposed to ban non-compete clauses stating that employer restriction suppresses wages artificially for workers who are interested in changing employments.

The proposal would bar businesses from signing non-compete agreements with employees and the employers will have to rescind any such existing clauses.

As per the FTC, around 30 million Americans are currently working under such agreements. It stated that the proposal can increase the wages of employees by around $300 billion per year.

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FTC chairperson Lina Khan said, “The freedom to change jobs is core to economic liberty and to a competitive, thriving economy.”

"Non-competes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand," she stated.

The FTC stated that the measure will not apply to other restrictions in employment like non-disclosure agreements.

However, the proposal received the US Chamber of Commerce's scathing response which called it "blatantly unlawful" in its statement.

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Senior vice president of the business lobby Sean Heather said, "Since the agency's creation over 100 years ago, Congress has never delegated the FTC anything close to the authority it would need to promulgate such a competition rule. The Chamber is confident that this unlawful action will not stand."

FTC Commissioner Christine Wilson, who voted against the proposed rule, said that the measure is a "radical departure from hundreds of years of legal precedent" that appeared unsupported by evidence, predicting it will "lead to protracted litigation in which the Commission is unlikely to prevail."

(With inputs from agencies)