The Federal Trade Commission (FTC) has announced the definitive implementation of a rule prohibiting the use of non-compete clauses in employment contracts in the United States, often utilized by employers to prevent the transfer of knowledge or skills to competitors.
FTC Chair Lina Khan emphasized the importance of this new regulation, stating that “non-compete clauses suppress wages, stifle innovation, and deprive the American economy of its essential dynamism.” According to FTC estimates, abolishing these clauses could result in the annual creation of over 8,500 new companies, as well as a significant increase in workers’ wages.
The american Chamber of Commerce challenged the ban on non-compete clauses, arguing that it is unnecessary, illegal, and represents a blatant power grab. Additionally, several business associations stated that the proposed rule hinders rather than protects competition, and that agreements are crucial for small businesses, which may face the risk of losing executives, employees, or important partners to larger companies, as well as the risk of sharing sensitive information.
The deadline for the rule to take effect is 120 days after its publication (which has not yet occurred), providing companies with a period to adapt to the new requirements.
The rule can be accessed via the following link.
