Should The FTC Ban Noncompete Agreements?
The Federal Trade Commission (FTC) recently proposed a nationwide ban on noncompete agreements. If passed, the new rule would make it illegal for employers to enter into new noncompete agreements with their workers. As a result, many employees and consumers have been left wondering about the potential impact of this proposal.
What do you think? Should the ban take place?
Here are my thoughts?
Noncompete agreements are generally contracts that prevent employees from working with rival businesses or in certain geographical areas for a set period of time. Currently, around 30 million employees across various industries in the United States are bound by these agreements. The FTC estimates that a ban on these agreements would lead to a significant increase in wages, boosting the income of employees by nearly $300 billion.
Advocacy groups have praised the proposal, while business organizations have criticized the FTC for what they see as an overreach of government power. It is worth noting that noncompete agreements are already illegal in California, North Dakota, and Oklahoma for almost all workers. Meanwhile, other states have varying degrees of restrictions in place.
As someone who has litigated noncompete clauses and agreements in court, I am generally not in favor of them. While some employers may argue that these agreements are necessary to protect their intellectual property and trade secrets, I believe for the most part, they are used to stifle employee mobility and suppress wages.
If you’re an employee or a business owner, you may be wondering how this proposed ban could impact your industry. For employees, the ban could make it easier to switch jobs and negotiate higher salaries. For businesses, it could mean having to use other existing ways to protect their intellectual property and trade secrets without resorting to noncompete agreements.
In my opinion, businesses can protect their intellectual property and trade secrets with nondisclosure (NDA) agreements. A nondisclosure agreement is a legal contract that requires parties to keep certain information confidential and not share it with others. I believe that when you balance the true interest of employee rights (ability to negotiate wages and job opportunities) with business IP concerns, nondisclosure agreements work just fine for protecting confidential information.
Here’s the new proposed rule if you want to dive a bit deeper into the issue.
https://www.ftc.gov/legal-library/browse/federal-register-notices/non-compete-clause-rulemaking
So, what do you think? Should noncompete clauses and agreements be banned nationwide? How could this proposal impact your industry and your role within it? Please let me know in the comments.
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Mitch Jackson, Esq.
2013 California Litigation Lawyer of the Year
2009 Orange County Trial Lawyer of the Year
https://mitchjackson.com | https://linktr.ee/jacksonwilson
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