Power At Work Blogcast #41: BREAKING NEWS BLOGCAST: FTC Kills Non-Compete Agreements
Apr 25, 2024
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Senior Fellow Seth Harris and Director Hannah Garden-Monheit discuss FTC's ban on non-compete agreements, its legal reasoning, impact on labor markets, worker empowerment, and expected legal challenges. They explore how the ban will increase competition, improve worker power, and face potential litigation hurdles.
FTC banned non-compete clauses to increase labor market competition.
New rule promotes entrepreneurship, innovation, and economic growth by banning non-compete agreements.
Deep dives
Prohibition of Non-Compete Clauses
The Federal Trade Commission issued a final rule prohibiting employers from including non-compete clauses in employment agreements, voted three to two. This move was encouraged by President Biden's executive order in July 2021 and supported by unions and worker advocates. The rule aims to prevent unfair competition and address the harm non-competes pose to workers by restricting their job mobility.
Key Elements of the Non-Compete Rule
The rule bans non-compete agreements for workers, except senior executives, and requires employers to inform workers that existing non-competes are unenforceable. It covers about 80% of the U.S. workforce, excluding employees of nonprofits and possibly public sector workers. The rule eliminates barriers to job mobility and encourages fair competition in labor markets.
Labor Market Impact and Enforcement
Once effective, workers subject to non-competes can challenge their enforceability, even in state courts, as the preemption clause nullifies them. The new rule targets not only active enforcement but also dismisses representations of non-existent non-competes. Employers are required to notify employees of the unenforceability of existing non-competes.
Implications for Innovation and Business Creation
By banning non-competes, the rule is projected to generate over 8,500 new businesses annually and spur 17,000 to 29,000 additional patents per year. It promotes competition, boosts entrepreneurship, and enhances innovation, leading to lower costs, increased job opportunities, and dynamic economic growth. Despite potential legal challenges, the rule aims to foster a more competitive market and benefit workers across various industries.
In this BREAKING NEWS BLOGCAST, Burnes Center for Social Change Senior Fellow Seth Harris is joined by Hannah Garden-Monheit, Director of the Federal Trade Commission's Office of Policy Planning, to discuss the FTC's new rule prohibiting employers from imposing non-compete agreements on their employees. Harris and Garden-Monheit explain the legal reasoning behind the rule and explore how the ban will improve competition in labor markets across the economy.
Tune in for expert analysis on the FTC's authority to issue labor regulations, the expected legal challenges the rule must overcome, and how the ban on non-compete agreements will increase worker power across the nation.
You don't want to miss this BREAKING NEWS BLOGCAST!
Hannah Garden-Monheit is the director of the Office of Policy Planning at the Federal Trade Commission. Before moving to the FTC, Garden-Monheit worked at the National Economic Council as Special Assistant to the President for Economic Policy and Director for Competition Council Policy.
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