The Federal Trade Commission (FTC) on Tuesday banned contractual practices that limit employees from going to work for a competing company under non-compete clauses, a step that will allow greater flexibility in the US labor market.
The new rule, which has national scope and establishes that non-compete clauses are a violation of the ‘FTC Act’, was approved by the agency with three votes in favor and the opposition of two Republican commissioners.
These types of clauses prohibit certain employees from going to work for a competitor for a certain period of time or from founding companies in specialized fields in which they have worked under certain circumstances.
“Non-compete clauses keep wages low, stifle new ideas, and rob the American economy of its dynamism”said FTC Chairwoman Lina Khan in a statement.
In Khan’s opinion, this new rule protects the freedom to look for a new job, start a new business or create a company with a new idea.
The FTC believes that this regulation will increase wages by allowing greater competition in skilled jobs, one of the great shortcomings of the American labor market.
The commission estimates that about 30 million Americans, 18% of the entire workforce, are subject to non-compete clauses and that the average wage increase from this measure will be about $524 a year.
The new rule will come into effect within 120 days after its publication in the Federal Register, although it is possible that employers or companies may oppose this rule in court to prevent its implementation.
Source: Gestion
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