Authorities in the United States are attempting to make agreements that allow companies to limit employees’ ability to leave for work at competitors illegal.
Non-compete clauses, according to the Federal Trade Commission (FTC), are “exploitative” and unfairly limit the opportunities of an estimated 30 million Americans.
According to the FTC, which enforces competition law, a ban would promote a more dynamic economy.
The business community immediately criticised the proposal.
It will now embark on a lengthy rule-making process.
Non-compete clauses were created to prevent employees from joining competitors and sharing trade secrets.
The proposal was labelled “blatantly unlawful” by the US Chamber of Commerce, one of the most powerful business advocacy groups.
“Congress has never delegated the FTC anything close to the authority it would need to promulgate such a competition rule since the agency’s creation over 100 years ago,” said Sean Heather, a senior vice president for the organisation. “The Chamber is confident that this illegal action will be overturned.”
According to the FTC, non-compete clauses have become entrenched in the US labour market, affecting roughly one in every five workers.
Though long associated with the ranks of business executives and high-tech workers, the agency claims that the practise has spread to fields such as warehousing and hair styling.
In 2021, US President Joe Biden, who has positioned himself as a pro-labor leader, directed the FTC to investigate ways to limit their use.
Lina Khan, who leads the agency and made her name criticising the might of big tech firms such as Amazon, on Thursday called the ability to switch jobs “core to economic liberty and to a competitive, thriving economy”.
“Noncompete agreements prevent employees 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.”
“The FTC’s proposed rule would promote greater dynamism, innovation, and healthy competition by ending this practise,” she said.
The announcement of the rule-making plans comes a day after the FTC announced legal actions against several companies that had forced workers, including security guards, to sign non-compete agreements.
Officials estimated that if the rule went into effect, workers would receive nearly $300 billion (£251 billion) more in wages per year.
