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FTC bans noncompete clauses, making it easier for workers to change jobs


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The Federal Trade Commission banned noncompete clauses that kept workers from quitting their jobs and seeking employment with rival companies.

The FTC on Tuesday voted 3-to-2 to approve the new rule, which will go into effect in 120 days.

Two Republicans voted against the rule. They argued that the FTC lacked jurisdiction to enact it.

Under the old noncompete agreement, CEOs and news anchors were forced to wait up to 6 months before accepting positions with rival companies.

Existing noncompete agreements are still in effect for senior executives, such as bankers and hospital administrators.

But for all other employees, existing noncompete clauses are unenforceable after 120 days.

The rule will impact tens of millions of nonunion workers.

“For nonunion workers, the only leverage they have is their ability to quit their job,” labor economist Heidi Shierholz told CBS MoneyWatch. “Noncompetes don’t just stop you from taking a job — they stop you from starting your own business.”

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Within hours of the vote on Tuesday, the U.S. Chamber of Commerce threatened a lawsuit to block “this unnecessary and unlawful rule.”

The trade group claimed the new rule would “undermine American businesses’ ability to remain competitive.”



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