The U.S. Federal Trade Commission, which enforces antitrust law, is considering banning companies from requiring workers to sign non compete agreements which the companies use to keep workers from leaving for better jobs.
How it affects workers
These agreements “block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand,” said FTC Chair Lina Khan.
Both President Joe Biden and Senate Majority Leader Chuck Schumer praised the FTC’s move, with Biden saying that they “are designed simply to lower people’s wages.”
Schumer said that the provisions have held “American workers hostage for decades.”
Massive increase in wages
FTC Commissioner Rebecca Slaughter said in 2020 that surveys have estimated that 16% to 18% of all U.S. workers are subject to noncompete provisions.
Meanwhile, nearly 10% of American workers surveyed in 2020 were bound to a training repayment agreement.
The agency estimated that if the rule passes, wages to U.S. workers would rise by $300 billion per year and an estimated 30 million Americans would have better career opportunities.
Scrapping noncompete agreements
It would require companies with existing noncompete agreements to scrap them and to inform current and past employees that they have been canceled.
Further, it would also stop companies from requiring workers to reimburse them for training if they leave before a certain period of time.
Banning training repayment agreements
This is a strategy some companies began to employ when noncompete provisions attracted tougher scrutiny.
The training repayment would be banned if it “is not reasonably related to the costs the employer incurred for training the worker,” the rule proposes.
Possible legal action
The U.S. Chamber of Commerce is considering suing to stop the rule but not immediately, said Sean Heather, their antitrust expert.
He said they are contemplating legal action since the Chamber did not believe that the FTC had the statutory authority to issue rules on competition matters.
More opposition
The rule will face further challenges, with focus on whether Congress authorized the FTC to adopt nationwide bans on what the agency deems anticompetitive practices.
Richard Powers, a former acting head of the Justice Department’s Antitrust Division, said that it’s doubtful whether the FTC rule would survive a legal challenge.
