The Federal Trade Commission (FTC) helps guide and enforce federal business policy. The FTC must balance the needs of organizations with the needs of the public, including employees. Occasionally, the FTC decides to make changes that have major implications for how businesses operate and the rights of individual employees.
The organization’s recent scrutiny of popular employment contract inclusions could lead to some significant changes in the upcoming months. In 2023, the FTC publicly announced concerns about how restrictive covenants in employment contracts affect workers and deter fair competition. The organization indicated the possibility of a ban on non-compete agreements in particular. A vote on that potential policy change could take place in April 2024.
What has happened so far?
For years, non-compete agreements have affected the rights of skilled workers and educated professionals to accept new jobs or start their own businesses. Many powerful companies require that new employees or those accepting promotions sign contracts with non-compete agreements that limit their future work opportunities.
The FTC recently asserted that non-compete agreements can have a chilling effect on the economy. Following the release of materials about non-compete agreements and their impact on the economy, the FTC began accepting public commentary. Those with an interest in this policy could submit feedback for consideration as the FTC moved forward with the potential ban on non-compete agreements.
Several organizations that represent business interests indicated an intent to challenge any non-compete ban that the FTC implements. The feedback period closed in 2023, and the FTC could potentially vote on a federal ban on non-compete agreements in the next few weeks. Should be FTC approve a ban, there could be legal challenges brought against the new policy.
It could potentially be months or years before the FTC’s vote has any real-world impact on employees. Eventually, however, a ban could mean that those bound by restrictive covenants can start businesses or take better jobs without fear of facing a lawsuit.
Employers may hold people back from bettering their circumstances or developing entrepreneurial ideas by forcing them to sign restrictive covenants as part of their employment agreements. Tracking potential changes to federal policy may benefit those who are limited by complex employment agreements and eager to change their circumstances.