Noncompete No More? FTC Passes Controversial Ban for Now

On April 23, the Federal Trade Commission (FTC) voted to ban employers from imposing noncompete agreements on almost all workers. The ban, which passed three to two, has already faced legal backlash.

According to the rule, employers must tell current and past paid employees, independent contractors and unpaid workers that they are no longer enforcing their noncompete agreements.

Those within the FTC who voted for the ban argued that noncompete agreements are “unfair” because they limit where an unsatisfied employee could find a new job.

For senior executives, who are employees making more than $151,164 per year and in “policy-making positions,” current noncompete agreements remain, but future contracts will not be allowed.

The ban is supposed to take effect 120 days after it appears in the Federal Register, but current legal action could change that deadline.

On the afternoon of April 23, the tax services and software company Ryan LLC filed a suit against the ban in Texas federal court. The company argued that the FTC was overstepping its authority and looked to make the ban unenforceable.

On April 24, the U.S. Chamber of Commerce filed a similar suit regarding the ban in Texas federal court. It claimed the FTC is responsible for enforcing current antitrust laws, not defining other anticompetitive behavior. The Chamber of Commerce also wants to ensure the ban won’t be enforced until legal action has concluded.

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