The FTC has banned noncompete agreements

🌈 Abstract

The article discusses the Federal Trade Commission's (FTC) decision to ban nationwide noncompete agreements, which are commonly used in the tech industry to prevent employees from working for or starting competing businesses. The FTC found that noncompete agreements keep wages low, suppress new ideas, and limit economic dynamism, and has proposed alternatives such as trade secret laws and non-disclosure agreements.

🙋 Q&A

[01] FTC's Ban on Noncompete Agreements

1. What is the FTC's decision regarding noncompete agreements?

• The FTC has voted to ban noncompete agreements nationwide, stating that they are an "unfair method of competition".
• The change will force companies to reverse existing noncompete agreements and notify employees about the change.
• Existing noncompete agreements for senior executives earning more than $151,164 annually can stay in place, but companies cannot enter or enforce new agreements.

2. What are the FTC's reasons for banning noncompete agreements?

• The FTC found that noncompete agreements keep wages low, suppress new ideas, and rob the American economy of dynamism.
• The FTC believes there are alternatives to noncompete agreements, such as trade secret laws and non-disclosure agreements.

3. What are the estimated impacts of the FTC's ban on noncompete agreements?

• The FTC estimates that the ban will lead to the creation of over 8,500 businesses each year.
• The ban is also expected to lower healthcare costs and raise compensation for workers.

[02] Prevalence and Enforcement of Noncompete Agreements

1. Where are noncompete agreements commonly used?

• Noncompete agreements are especially prevalent in the tech industry.

2. Can you provide examples of companies enforcing noncompete agreements?

• Amazon has enforced and then retracted a noncompete agreement for warehouse workers.
• Acer sued its former CEO for allegedly breaching a noncompete policy by becoming a consultant for Lenovo.

3. When will the new FTC rule go into effect?

• The new rule will go into effect 120 days after it's published in the Federal Register.