The US FTC bans noncompete clauses that restrict job switching, the first time in 50+ years that the FTC has issued a regulation mandating an economywide change

Move sets up high-stakes legal clash with business groups over the agency's power — WASHINGTON—The Federal Trade Commission …

Wall Street Journal 2024-04-24

Context & Ripple Effects

The rule follows the FTC’s earlier proposal to prohibit worker noncompetes, extending the agency’s broader effort to regulate conduct it considers anticompetitive. Its economywide scope makes the measure a consequential test of the FTC’s rulemaking authority.

That test quickly became central: a Texas district court later struck down the planned noncompete ban, underscoring that the practical impact depends on the outcome of litigation rather than the rule’s issuance alone.

First-order effects

Employers using noncompetes and workers subject to them face an immediate legal and compliance dispute over whether those restrictions can remain enforceable.
The FTC shifts from proposing a labor-market intervention to defending its authority to impose an economywide rule against business-group challenges.

Second-order effects

Companies seeking to protect customer relationships, confidential know-how, or retention may place greater weight on narrower contractual and trade-secret protections if broad noncompetes cannot be relied upon.
The court challenge forces employers and workers to operate amid uneven certainty: the announced rule changes expectations, while its legal status determines whether employment practices must actually change.

Third-order effects

The episode could move competition policy further into employment terms, but the later court ruling shows that durable change depends on courts accepting the FTC’s claimed rulemaking power.
If noncompetes face sustained limits, disputes over departing employees are likely to concentrate more on alleged misuse of confidential information and trade secrets than on contractual bars to switching jobs.

The trend: Labor-market competition policy is shifting from scrutiny of individual employer conduct toward broader rules that test agencies’ power to reshape standard employment contracts.

Discussion

@gergelyorosz_ Gergely Orosz on threads
Huge news for anyone working in tech in the US. Noncompetes are now banned: not just in California (like before), but nationwide. Very, very relevant for anyone at Amazon (which is the Big Tech that has enforced noncompetes even for low-level engineering positions).
@jyarow Jay Yarow on x
The reason Silicon Valley flourished is because of the lack of non competes, or that's the theory anyway. I wonder if banning non competes across the board has similar effects. https://www.cnbc.com/...
@gergelyorosz Gergely Orosz on x
As proof of how good having *no* noncompetes are for the economy: California was one of the only states banning noncompetes. Also the hotbed for innovative tech companies. Highest median tech compensation across the US. Best place to start an innovative business. Coincidence?
@kelseyhightower Kelsey Hightower on x
The FTC ban on noncompetes is pretty solid but has a carve out for senior executives under existing agreements, but prohibits companies from entering into new noncompetes. [image]
@carnage4life Dare Obasanjo on x
This is incredible news. The tech ecosystem has benefited greatly from the fact that non-competes were banned in Silicon Valley and now these same benefits will pour out into every industry in America. https://www.ftc.gov/...
@vxunderground @vxunderground on x
The United States FTC has banned non-compete agreements. We look forward to all of you creating a cyber security startup https://www.ftc.gov/...
@coribush Cori Bush on x
I applaud this decision by the FTC. Noncompetes were always a scam to keep workers' wages down. Under no circumstance should a company be able to prevent people from making ends meet. Today's action will allow workers to switch jobs, earn higher wages, start businesses & more.
@amy_k_nelson Amy Nelson on x
Amazon spent years trying to put my husband in federal prison for allegedly violating his non-compete. They didn't win, but we lost our home, our future, our careers. I am grateful to the @FTC for doing the right thing here. Thank you.
@douglaslfarrar Douglas Farrar on x
The FTC just published the noncompete rule they are going to vote on later today. You can see the full text of, and what's different about this rule from the initially proposed rule at this link 🔗 https://www.ftc.gov/...
@quinnypig Corey Quinn on x
Amazon had the chance to be leaders on the non-compete point for years. Instead, here they are: forced to treat their employees slightly better only because the government is making them. It's clear that regulation is required to make Amazon behave. https://www.ftc.gov/...
@ftc @ftc on x
FTC announces rule banning #noncompetes: https://www.ftc.gov/... /1
@gergelyorosz Gergely Orosz on x
My next prediction: Amazon will have no choice but to start paying more outside California. Their noncompetes (and the precedent of enforcing them even for L4 levels (!!) ) has kept a lot of people not daring to switch jobs (Amazon practically competes with every other tech co).
@garrytan @garrytan on x
For startups, this is actually going to help founders a lot. One of the key drivers of California innovation is that noncompetes are unenforceable — that driver is now everywhere in America, and it's a great step towards many thousands more founders striking out on their own!
@isforat Brian Hall on x
Some people might know that Amazon sued me after I had left AWS and later went to Google Cloud. https://cnbc.com/2020/06/11/aws-case- against-worker-who-joined-google- reignites-non-compete-debate.html. I cannot be happier to see the FTC ruling to ban non-competes in the US. “N…
@repbowman Congressman Jamaal Bowman on x
LET'S GO! We've been pushing the FTC to ban noncompetes and now they are so close to finalizing a rule that will help 30 million workers lower their healthcare costs, expand innovation, and make higher salaries. This is the result of doing the work for the people!
@repmarkpocan Rep. Mark Pocan on x
Noncompete agreements are bad for workers and bad for the economy. They violate a core principle of a free economy: the right to choose a better job. This new rule is great news!
@senwarren Elizabeth Warren on x
Banning noncompetes is life-changing for millions of workers. This action will allow people to switch jobs or start a business, boosting wages, spurring innovation & lowering health care costs. Massachusetts workers stand to gain $2 billion in higher pay. A big Biden win!
@joshconstine Josh Constine on x
Ditch your employer and go start a competitor, because the FTC just banned noncompetes nationwide and made existing ones unenforceable for everyone except senior execs. Now the question is whether employers become more cagey about widely sharing strategy internally. [image]
@agellison Attorney General Keith Ellison on x
I have long been an opponent of non-compete agreements, so this is great news. This will boost innovation, make competition fairer, strengthen our economy, create jobs, and raise wages for millions of workers across the country. Well done, @linakhanFTC!
@gergelyorosz Gergely Orosz on x
Huge news for anyone working in tech in the US. Noncompetes are now banned: not just in California (like before), but nationwide. Very, very relevant for anyone at Amazon (which is the Big Tech that has enforced noncompetes even for low-level engineering positions). [image]
@medawsonjr Mark E. Dawson, Jr on x
@GergelyOrosz I won't lie - I used to *love* non-competes. In the HFT industry, you'd get paid between 75 - 100% of your salary for the entire duration, which typically lasts btwn 6 months to 1 year. I took some of my most memorable vacations during mine.
@bindureddy Bindu Reddy on x
This is HUGE news for start-ups. At Abacus AI, we could not hire a superstar even after he had left Amazon because of a non-compete!! SV owes its existence to noncompetes that have been illegal in California forever. Now, we will see a massive start-up ecosystem in Seattle as... …
@senfettermanpa Senator John Fetterman on x
.@POTUS has delivered another massive W for working people. ✅ Noncompete clauses prevent too many workers from getting a new job with better pay + benefits. Today, @FTC made them ILLEGAL.
@lydiadepillis Lydia DePillis on x
The @FTC does not pull its punches, banning noncompetes for everyone except senior executives with existing contracts — after years of research and reporting showing that they prevent workers from bargaining for better wages and working conditions. https://www.ftc.gov/...
@stevesi Steven Sinofsky on x
The FTC banned employers from using noncompete contracts to prevent most workers from joining rival firms https://www.wsj.com/... // non competes should be illegal but not by regulatory overreach.
@km Kanyi Maqubela on x
Love this. California's advantage now becomes everybody's. I've been under a non-compete before: such a waste of talent.
@linakhanftc Lina Khan on x
1. Today @FTC issued a final rule banning noncompetes for workers across the country. The rule will ensure that Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market. https://www.ftc.gov/...
@douglaslfarrar Douglas Farrar on x
The rule is made final by a 3-2 vote.
@florianederer Florian Ederer on x
“New noncompetes banned for all workers as of effective date.” The FTC just issued a complete ban on all employee non-competes. No carveouts, no limitations, no exceptions. Wow!
@moreperfectus @moreperfectus on x
BREAKING: The FTC just banned non-compete agreements. The Federal Trade Commission has issued a final rule making it illegal for bosses to make workers sign noncompetes in any scenario, and voiding nearly all existing noncompetes. This is a game changer for American workers. [vid…
@tomloverro Tom Loverro on x
Plot twist! A regulator made a great move. https://www.npr.org/...
r/overemployed r on reddit
U.S. bans noncompete agreements for nearly all jobs
r/Journalism r on reddit
How do you think this will change journalism?
r/politics r on reddit
F.T.C. Issues Ban on Worker Noncompete Clauses
r/Destiny r on reddit
U.S. bans noncompete agreements for nearly all jobs
r/stupidpol r on reddit
Federal Trade Commission bans Non-Compete agreements, makes current clauses unenforceable for 30 million workers. …
r/WorkReform r on reddit
FTC Announces Rule Banning Noncompetes
r/Columbus r on reddit
FTC announces federal ban on non-compete agreements. Big news for hospital workers in the area
r/kurosanji r on reddit
This could have quite significant consequences, not only for Nijisanji, but for every Eastern vtuber agency conducting business with US talents …
r/HVAC r on reddit
Not specifically HVAC related but definitely affects us: FTC just voted to ban noncompete agreements for nearly all jobs aside from senior executive positions.
r/wallstreetbets r on reddit
FTC Announces New Rule Banning Noncompetes
r/Lawyertalk r on reddit
There goes 30% of contract law hypos
r/WorkReform r on reddit
Good news for working people! U.S. bans noncompete agreements for nearly all jobs.
r/cernercorporation r on reddit
FTC Announces Rule Banning Noncompetes
r/PVF r on reddit
FTC Announces Rule Banning Noncompetes - Implications for Players on PVF / LOVB ?
r/law r on reddit
FTC Bans Noncompete Agreements for Employees other than “Senior Executives”
r/politics r on reddit
U.S. bans noncompete agreements for nearly all jobs
r/WhatBidenHasDone r on reddit
FTC bans most noncompete agreements for nearly all jobs
r/Chiropractic r on reddit
FTC Announces Rule Banning Noncompetes
r/ABA r on reddit
FTC Ban on Non-competes
r/biotech r on reddit
FTC Announces Rule Banning Noncompetes
r/behindthebastards r on reddit
FTC Announces Rule Banning Noncompetes
r/anime_titties r on reddit
FTC Announces Rule Banning Noncompetes
r/FreightBrokers r on reddit
BREAKING NEWS: FTC Votes to Ban Non-Compete Agreements
r/antiwork r on reddit
FTC Announces Rule Banning Noncompetes
r/politics r on reddit
FTC Announces Rule Banning Noncompetes
r/physicaltherapy r on reddit
Good News! The FTC has banned non-compete agreements!
r/clinicalresearch r on reddit
FTC bans non-competes
r/politics r on reddit
FTC votes to ban noncompete agreements
r/epicsystems r on reddit
It happened: FTC voted to ban non-compete agreements

Chronicles