The Federal Trade Commission (FTC) has proposed a new rule prohibiting companies from limiting their employees from working for a rival through non-compete agreements. These agreements, which affect 20-45% of US private sector workers, can prevent employees from working for competitors for months or years after employment and restrict workers’ ability to start their competing businesses.

Such agreements can reduce competition within industries and limit worker pay, which is why the FTC’s proposal aims to increase competition and raise wages. The rule would take effect 180 days after publication and could increase wages by nearly $300 billion annually. The public can submit comments for 60 days, after which the FTC will move to finalize the rule.

The proposed rule covers not just employees but also independent contractors, interns, volunteers, and other workers. The ban is supported by President Biden, who believes non-compete clauses “lower people’s wages.” However, defenders of non-competes argue that they encourage investment in training and sharing of sensitive information, as well as job creation.

As employees’ rights attorneys in New York, we must understand the impact of these restrictions on the rights of workers and the potential benefits for our clients.

A non-compete agreement is a contract between an employer and an employee that prohibits the employee from working for a competitor or starting their own competing business for a specified period after leaving their current job. These agreements have been the subject of much criticism as they restrict worker mobility, stifle innovation, and limit employment opportunities.

The FTC’s proposal aims to address these concerns by limiting non-compete agreements to only those situations where they are necessary to protect a company’s confidential information and trade secrets. Companies must justify their use of non-compete agreements and show that they are not overly broad or restrictive. They would also be required to inform employees of the terms of the non-compete agreement before they begin their job and to pay employees for the duration of the non-compete period if it is enforced.

As employees’ rights attorneys in New York, these restrictions present a potential opportunity for our clients to challenge the enforceability of non-compete agreements that may be overly broad or restrictive. The restrictions could also provide additional protections for employees, who may now have greater rights and freedoms in their career and business opportunities.

The FTC’s proposed restrictions on non-compete agreements are a significant step in the ongoing effort to protect workers’ rights and promote greater mobility and innovation in the job market. As employees’ rights attorneys in New York, it is our responsibility to stay informed on the progress of these restrictions and be prepared to advise our clients on how to navigate these changes best as they unfold. We must also continue to advocate for workers’ rights and ensure that their freedoms and opportunities are protected in the workplace.

The employees’ rights attorneys of Risman & Risman, P.C. are eager to help and discuss your non-compete agreement concerns with you. Please get in touch with us at (212) 233-6400 or contact us online. There is no charge for the consultation.

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