FTC proposes rule that would ban noncompete clauses
The Federal Trade Commission is proposing a new rule that would prevent employers from imposing noncompete clauses for workers that prohibit them from joining a competitor, typically for a period of time, after they leave the company.
The proposed rule released Thursday follows an executive order signed by President Joe Biden in 2021 targeting what he labeled anticompetitive practices in tech, health care and other parts of the economy. The order included a call for banning or limiting noncompete agreements to help boost wages.
The FTC proposal is based on a preliminary finding that noncompete clauses quash competition in violation of Section 5 of the Federal Trade Commission Act. Section 5 bans unfair methods of competition.