FTC Finalizes Rule Banning Non-Compete Clauses
FTC Chair Lina Khan Announces Special Meeting
Over 26,000 Public Comments Received on Proposed Rule
The Federal Trade Commission (FTC) today finalized a rule banning non-compete clauses in employment contracts. The rule, which was passed by a 3-2 vote along party lines, will prohibit employers from entering into non-compete agreements with their employees.
The FTC estimates that fewer than 1% of workers are senior executives who are currently exempt from the non-compete ban. The final rule specifically defines the term "senior executive" to ensure that only a small number of employees are able to enter into non-compete agreements.
In January 2023, the FTC issued a proposed rule banning non-compete clauses. The proposed rule was subject to a 90-day public comment period, during which the FTC received over 26,000 comments.
FTC Chair Lina M. Khan announced the special Open Commission Meeting at which the final rule was voted on. She stated that the rule is "an important step toward promoting economic mobility and protecting workers' rights." The FTC's Republican commissioners voted against the rule, arguing that it would harm businesses and stifle innovation.
The final rule will take effect 180 days after it is published in the Federal Register. Businesses will have until then to bring their employment contracts into compliance with the new rule.
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