By: Gregg Zeff
On: August 29, 2024
Background of the Federal Trade Commission’s Ban on Non Compete Agreements
In April, the Federal Trade Commission made an unprecedented move to ban non compete agreements. The move, driven by the desire to create a more dynamic American economy, will protect workers when changing jobs and create a new paradigm by stimulating new business formations and new ideas into the market. Non compete agreements place restrictions on workers that prevent them from taking new jobs or starting their own businesses. These obtrusive measures have left many workers forced to stay in jobs where they are exploited and employers can capitalize on such unfair methods of competition, directly in violation of Section 5 of the FTC Act.
Who Does the Non Compete Agreement Ban Apply To?
According to the Federal Trade Commision, approximately 30 million American workers are affected by non compete agreements, or 18% of the workforce. The non compete ban includes traditionally paid workers of for-profit employers. It also includes a variety of others that include:
- Unpaid employees/volunteers
- Interns/externs
- Consultants/staffing agencies
- Independent contractors
- Apprentices
The main exception to rule, however, is senior executives who hold policy making positions and earn more than $151,000 a year. These individuals may be held to their previous agreements if they were currently working under a non compete agreement. For senior executives hired after April 2024, such clauses will be deemed unlawful.
How Will the Non Compete Agreement Ban Impact Businesses?
Businesses will find themselves both positively and negatively affected by the FTC ban on non compete agreements. Businesses will experience difficulty retaining employees, higher turnover rates, and protecting sensitive information. However, with employees having more freedom to move between jobs, the market will experience more competition and innovation. Ultimately businesses will be staffed with empowered employees and economic growth.
Legal Challenges and Opportunities Created by the Non Compete Agreement Ban
The FTC non compete ban agreement is creating challenges and opportunities for employees and businesses alike. The ban is now forcing many companies to review their hiring practices and current employee contracts. For smaller companies, the removal of non compete agreements will enable them the opportunity to have a larger pool of workers to employ. Other companies will be faced with challenges in dealing with existing non-competes in current contracts.
Legal Challenges to the FTC’s Non Compete Agreement Rule
Currently, the FTC’s non compete agreement rule has been challenged in the courts as unconstitutional. Litigation has arisen in regards to the FTC has exceeded its boundaries and its authority as an administrative agency, all the while failing to consider the vast variety of employers and industries at hand.
How Will Employees Benefit from the Non-Compete Ban?
Eliminating non compete agreements will significantly impact the future of millions of workers. It is employees who will ultimately reap the greatest rewards from the FTC ban on non compete agreements. The non compete ban will more than likely afford workers the following benefits:
- Higher wages
- Enhanced mobility throughout their perspective industries
- Greater opportunities for entrepreneurship and self-employment
- Increased in job satisfaction
- Improved legal protection
Contact Zeff Law Firm to review any non compete agreements before signing
If you are currently seeking employment, the legal experts at Zeff Law Firm will be able to guide you through any non-competes your prospective employer may present to you. With the recent bans on non compete agreements, our experienced attorneys can review these documents and to ensure your rights are protected and save you from future costly litigation. Contact Zeff Law Firm to schedule your review of any business contracts today.