Summary

In a controversial move shaking up the American workforce, the Federal Trade Commission has banned most noncompete agreements nationwide such as restrictive contracts that have locked millions of workers into their jobs for years. After a deeply partisan 3-2 vote, this sweeping new rule will free around 30 million people from these mobility-restricting clauses, potentially reshuffling vast segments of the labor market. While supporters laud a long-overdue leveling of the playing field, major business groups vow to fiercely fight what they deem government overreach that will stifle competition.

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In a groundbreaking move, the Federal Trade Commission referred to as the FTC has banned nearly all noncompete agreements nationwide, giving workers more freedom to change jobs and start their own businesses.

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After receiving well over 26,000 public comments, the FTC voted 3-2 along partisan lines to prohibit employers from enforcing noncompete clauses for most workers. The 3 Democratic commissioners voted for the ban, while the 2 Republican commissioners voted against it. These controversial noncompete agreements restrict employees from joining a competitor or starting a rival business, often for months or years after leaving a job.

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The new rule represents a sweeping change as an estimated 30 million Americans are currently bound by noncompetes across industries from fast food to Big Tech. The FTC argues these agreements suppress wages by limiting job mobility and entrepreneurship for roughly one in five workers. The agency estimates the ban could raise earnings by nearly $300 billion per year as workers freely pursue better opportunities.

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FTC Chair Lina Khan highlighted personal stories of workers "stuck in abusive workplaces" due to noncompetes, saying they rob people of "economic liberty" and other freedoms. However, the two Republican commissioners dissented, arguing the FTC overstepped its legal authority which could invite lawsuits challenging the ban.

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Supporters, including labor unions and worker advocacy groups, praise the ban as eliminating what they deemed one-sided noncompete agreements helped to even the playing field for American workers that have been exploited for a long time.

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However, major business groups firmly opposed the policy. The U.S. Chamber of Commerce has vowed to take legal action against what it calls an "unnecessary, unlawful and blatant power grab" by the FTC. Business interests argue noncompetes safeguard trade secrets and incentivize workforce training investments. 

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Although the noncompete ban will take full effect in the next few months aside from existing contracts for senior executives, some states like California have already restricted such agreements to foster competition and innovation. 

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Companies will now be forced to notify current and former employees that their noncompete agreements can no longer be enforced.

Widespread legal challenges are anticipated to come in full force, with potential court battles ultimately deciding whether the noncompete ban stands or gets struck down.

However, the FTC remains determined, claiming the newfound job mobility from this move will spur competition, entrepreneurship, and higher wages across the labor market. The agency argues the ban will open up new career avenues for many American workers previously obstructed by restrictive noncompete clauses in their employment contracts.

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Thank you for listening to this Current2 Story and let us know your thoughts on the FTC eliminating noncompete restrictions.

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US bans worker 'noncompete' agreements as business groups vow to sue | Reuters

U.S. bans noncompete agreements for nearly all jobs | NPR

FTC Bans Noncompete Agreements That Restrict Job Switching | WSJ