The Federal Trade Commission proposed a rule Thursday that would ban U.S. employers from imposing noncompete clauses on workers, a sweeping measure that could make it easier for people to switch jobs and deepen competition for labor across a wide range of industries. The proposed rule would prevent employers from imposing contract clauses that prohibit their employees from joining a competitor, typically for a period of time, after they leave the company. Advocates of the new rule argue that noncompete agreements contribute to wage stagnation because one of the most effective ways to secure higher pay is switching companies. They argue that the clauses have become so commonplace that they have swept up even low-wage workers. Opponents argue that by facilitating retention, noncompete clauses have encouraged companies to promote workers and invest in training, especially in a tight labor market. The public has 60 days to submit commentary on the rule before it takes effect. During a Cabinet meeting, President Joe Biden called the FTC action “a huge step forward in banning non-compete agreements that are designed simply to lower people’s wages.” “These agreements block millions of retail workers, construction workers and other working folks from taking better jobs and getting better pay and benefits in the same field,” Biden said. The FTC has moved aggressively to curb the power of major corporations under Chair Lina Khan, a legal scholar and Washington outsider whose appointment by Biden signaled a tough antitrust stance. The agency estimates that the new rule could boost wages by nearly $300 billion a year and expand career opportunities for about 30 million Americans. “Noncompetes 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,” Khan said in a prepared statement. The FTC’s proposal comes amid an already competitive job market, particularly in industries that suffered mass layoffs during the first year of the COVID-19 pandemic and have since struggled to recall their workers. Many workers remain on the sidelines, holding out for better pay, coping with lingering childcare or health issues, or opting for early retirement. “There is a potential that it will contribute to the ‘great resignation’ that everyone is talking about to some degree, but employees are simply losing one of the tools in their toolbox and there are other ways to retain top talent,” said Vanessa Matsis-McCready, associate general counsel and director of human resources for Engage PEO, which provides HR services for small- and medium-sized companies. “You will see a lot of business trying to retain top talent via raises or other fringe benefits.” Employers nationwide are still hiring and layoffs are historically low, despite high-profile job cut announcements from companies such as software provider Salesforce, Facebook’s parent company Meta, and Amazon. The government is expected to announce Friday that employers added a solid 200,000 jobs last month, and that unemployment remained 3.7%, near a half-century low. A 2019 analysis by the liberal Economic Policy Institute estimated that 36 million to 60 million workers could be subject to noncompete agreements, which the group said companies have increasingly adopted in recent years. While such agreements are most common among higher-paid workers, the study found that a significant number of low-wage workers were subjected to […]

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