Federal Trade Commission Issues NPRM To Ban Noncompete Clauses

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The Federal Trade Commission (FTC) has issued a notice of proposed rulemaking (NPRM) that bans employers from imposing noncompete clauses on their workers. The NPRM is based on preliminary studies that find noncompetes create an unfair method of competition, therefore, violating Section 5 of the Federal Trade Commission Act.

Noncompete agreements are widespread and can block the creation of new businesses and suppress wages. The NPRM would prohibit new and existing noncompete clauses to address these issues.

The NPRM would apply to independent contractors and anyone who works for an employer, whether paid or not. The FTC estimates that the NPRM could help increase wages by nearly $300 billion annually and expand career opportunities for about 30 million American workers.

The public is invited to submit comments regarding the NPRM by March 10, 2023. After this, the FTC will issue a final rule that will include changes based on the comments received and any further analysis of this issue.