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What the proposed ban on noncompete clauses means for you

FTC proposes new rule to ban non-compete clauses

Job hopping is widely considered the best way to improve your career prospects and pay.

Sometimes, noncompete clauses stand in the way. These contracts are meant to protect the investments companies have put into their businesses and employees. It’s estimated that more than 30 million workers — or roughly 18% of the US workforce — are required to sign one before accepting a job.

Recently, the US Federal Trade Commission proposed a new rule banning the use of noncompete clauses in employee contracts, which suppresses wages, hampers innovation and prevents entrepreneurs from starting new businesses, the agency said.

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The proposed rule would also require companies with existing non-compete agreements to scrap them and to inform current and past employees that they have been cancelled.

“That’s part of what makes this so radical,” said Michael Schmidt, a labor and employment attorney at Cozen O’Connor in New York. Not only is “the federal government taking this action broadly but with practically no exception.”

As a result, the impact will be felt by companies with employees who are governed by noncompetes as well as companies looking to hire workers who are bound by noncompetes, said Benjamin Dryden, a partner at Foley & Lardner in Washington, DC, who specializes in antitrust issues relating to labor and employment.

“This regulation will affect, more or less, every business in the country,” he said.

Noncompetitives are increasingly used across industries

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“Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they

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